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Pension v Mortgage
boobbby
Posts: 769 Forumite
I am new to this site so if this question has been asked before I apologise.
This is the scenario. Two brothers both aged 25 both earning the same income all their lives decide to save for their retirement.
One decides to live in his council house and put 15% of his earning into a private pension fund.
The other brother buys a 3 bedroom semi detached house and take out a 25 year repayment mortgage. He doesn’t save any money although he does after 10 years upgrade to a 4 bedroom detached house and take out another 25 year repayment mortgage.
At the age of 60 they both retire and move to Spain.
The one on a pension uses his lump sum to buy his flat in Spain the remainder of his money will fund his pension.
The brother with the house also buys a flat for the same price with the proceeds from the sale of his house and uses the remainder of his money to fund his pension.
Who would have the bigger pension if they were due to retire next week?
This is the scenario. Two brothers both aged 25 both earning the same income all their lives decide to save for their retirement.
One decides to live in his council house and put 15% of his earning into a private pension fund.
The other brother buys a 3 bedroom semi detached house and take out a 25 year repayment mortgage. He doesn’t save any money although he does after 10 years upgrade to a 4 bedroom detached house and take out another 25 year repayment mortgage.
At the age of 60 they both retire and move to Spain.
The one on a pension uses his lump sum to buy his flat in Spain the remainder of his money will fund his pension.
The brother with the house also buys a flat for the same price with the proceeds from the sale of his house and uses the remainder of his money to fund his pension.
Who would have the bigger pension if they were due to retire next week?
0
Comments
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You are talking about them using two different asset classes to save for their retirement. If property goes in price faster than the investment funds, the one owning the property could do better. And vice versa.
At different times, different investments perform at different rates. Putting all your money into one asset class is risky and foolish. Just because the late/early 2000s have been better for property, much of the 90s and last 2 years have favoured other investments.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I would also suggest that anyone who can pay off a repayment mortgage on a three bedroom semi detached house with only 15% of their gross income is wealthy enough so that they could afford to do both at the same time.
You are comparing apples with pears I'm afraid. Either could result in a higher amount of money in retirement.0
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