Pensions Planning: The NUMBER

Gatser

zygurat789 wrote: »

I think you need to investigate that £7K increase in "other". You really should know what it is.

I agree
I do.
One daughter at Uni. (mainly)

YoungBusinessman

For my number, who knows. I am still young...even retiring 'early' will be at between 45-55 years old. By the time i am that age(25 years+) there most likely will not even be a retiring age/state pension,just a case of you make your own pension.

Hear of so many people losing out putting money into pensions i think i will remain liquid for most of pension income. I am researching all of this now as on track for debt free by early 2013, house purchase not long after, then il be looking at long term savings/getting mortgage free/getting a second place. Anyone who has retired before 50 i would love to hear how they have managed. I will most likely semi retire at 40. That is the position i would like to get myself in. So i have nearly 19 years to do it....how do i do it? Investing in a private pension is not much use if i cannot touch it till 55....and most likely that will be up by the time i am 55 aswel!

Would like to spread my risk somewhat and have own home MF, my own property portfolio..a few BTLs MF(not all mortgage free by 40 but at least 50% equity on 3 or 4 places), most my money in ISAs(if things still exsist)/fixed savings accounts and a low percentage of my savings in shares.

So since im young and have the advantage of compounding interest and time over alot on this thread, how do i go about this. What are my first couple of steps?
My 'plan' right now is
1)Pay off all business debt
2)Buy first property as 'home' to become a buy to let eventually
3)Increase emergency fund to a years income/fill out ISA each year
4)Look at next property, letting out the first one
5)??

Linton

YoungBusinessman wrote: »

...

Hear of so many people losing out putting money into pensions i think i will remain liquid for most of pension income. I am researching all of this now as on track for debt free by early 2013, house purchase not long after, then il be looking at long term savings/getting mortgage free/getting a second place. Anyone who has retired before 50 i would love to hear how they have managed. I will most likely semi retire at 40. That is the position i would like to get myself in. So i have nearly 19 years to do it....how do i do it? Investing in a private pension is not much use if i cannot touch it till 55....and most likely that will be up by the time i am 55 aswel!

Would like to spread my risk somewhat and have own home MF, my own property portfolio..a few BTLs MF(not all mortgage free by 40 but at least 50% equity on 3 or 4 places), most my money in ISAs(if things still exsist)/fixed savings accounts and a low percentage of my savings in shares.

So since im young and have the advantage of compounding interest and time over alot on this thread, how do i go about this. What are my first couple of steps?
My 'plan' right now is
1)Pay off all business debt
2)Buy first property as 'home' to become a buy to let eventually
3)Increase emergency fund to a years income/fill out ISA each year
4)Look at next property, letting out the first one
5)??

Various points to raise - I will leave it at two.....

1) You shouldnt believe the tabloid press about pensions losing money. Pensions are just a wrapper like an ISA. Anything you can invest in an ISA you can also invest using a pension. If anything pensions are more flexible and have the added advantage of access to 25% of the finalcapital as a tax free lump sum.

2) Having a few BTLs is hardly diversification. IMHO you do need to be significantly in a broad range of shares or funds of shares. Over the long term the evidence is that they can be expected to outperform anything else.

gadgetmind

YoungBusinessman wrote: »

Hear of so many people losing out putting money into pensions

Yes, but much of that is uninformed lip flapping. There are pitfalls, but there are also pitfalls with BTL, so do your research.

hugheskevi

even retiring 'early' will be at between 45-55 years old.

Retiring as young as 45 is very hard, primarily as each additional year early you retire is not just an extra year that you have to save to fund, but it is also a loss of one year of work in which to save.

But the good side of that is that if you are saving lots, the impact of just an extra year or two of work can be dramatic - even as much as 5-10% higher annual income for the rest of life in some of my calculation scenarios [sounds implausible, but at that point you have such big savings, you are getting very big income from investments].

Based on my own experience, when you plan, I'd check that your plans are consistent with how you will actually act when you get there. For example, you do all the maths, and let's say you are happy with a relatively frugal life and have calculated that you can retire at age 46. At that point, it is worth calculating what your income would be if you retired at age 47 - if working that extra year significantly increased your lifetime income, then in reality you probably would work to age 47 (or more) even if the initial plan wasn't to do so.

By the time i am that age(25 years+) there most likely will not even be a retiring age/state pension,just a case of you make your own pension.

My state pension age is 68 and I plan to retire in early 40s (early/mid 30s now). I put State Pension in my spreadsheet plans, but wouldn't rely on it actually happening until I was about age 60....that means for all intents and purposes I disregard it in my plans, except as something that could be a pleasant surprise.

Hear of so many people losing out putting money into pensions i think i will remain liquid for most of pension income.

Do your own research. If you always do as 'so many people' do, you will not be retiring until your 60s, as 'so many people' do

Pensions have a big, big place in the plans. They give the income you will need from age 55, with ISAs and other investments covering the period up to age 55, and the period between age 55 and other pensions starting if relevant.

Significant extra pension contributions (over and above those needed to get maximum employer contributions) cannot be ignored for higher rate taxpayers and lower rate taxpayers with access to salary sacrifice.

Anyone who has retired before 50 i would love to hear how they have managed. I will most likely semi retire at 40. That is the position i would like to get myself in. So i have nearly 19 years to do it....how do i do it?

By consuming significantly less than your income.

Higher income helps, obviously, but whatever income is, you have to keep consumption a lot, lot lower than your income to achieve the goal.

You can also plan to be very tax efficient, especially if you own your own business. As an example, you could perhaps plan to reduce mortgages to about 60% LTV (for competitive deals) and shovel money into pensions, paying off mortgages from the tax free lump sums at 55. Key thing is, have a plan of how everything comes together to be as efficient as possible.

Investing in a private pension is not much use if i cannot touch it till 55....and most likely that will be up by the time i am 55 aswel!

Pension is just a part of the plan. ISAs and unwrapped investments are for the early years of retirement, pension for the later years.

What are my first couple of steps?

Most important, get used to consuming a lot less than your income [by consumption, I mean money that is 'gone' - not money invested in house, etc].

I'd say a minimum of about 50% would be a useful starting point, although it will vary a lot according to income and other personal characteristics. Personally I aim for something like 70-80% before exceptional expenditure items (weddings, house purchase, car purchase major holidays, etc)

Then work out a detailed plan, making best use of all types of savings and investments. Reality won't work out anything like the plan in practice, so keep it flexible but keep coming back to it and reviewing it. The main thing is to always have a plan and be working toward the end goal.

jamesd

hugheskevi covered it well, living far below your means is the key secret to retiring early. I've been investing more than 60% of my net pay plus gross pension contributions for the last seven years. At the moment the total value is about 87% of what I've earned during those years.

gadgetmind

jamesd wrote: »

At the moment the total value is about 87% of what I've earned during those years.

I haven't sat down and worked it out but I guess I'm in the same ball park.

Yes, I'd love to buy a new car every 1-2 years and take 3-4 foreign holidays a year. I know many people who do but I also know that many of them are effectively hand to mouth.

jamesd

At the moment I could take a stable income of about £1,100 a month from now until state pension age if I stopped working. Not a big enough safety margin but it's sufficient.

The current GAD limit prevents me from taking a level income from now through and after state pension age, so my income would increase substantially after state pension age. The GAD limit doesn't let me draw on pension capital fast enough to get to the level income point.

Zekko

Wowzers, I wish my parents were in a position to have been able to pay for my university education at the time, and also help with the running costs of my car!

You are very generous

YoungBusinessman

Jamesd and gadget mind can i ask how old use are and your projected retirement age? You two are doing fantastic. I will be trying to live on half salary after i pay off debts and get on the ladder next year. Might take a year or so of overpayments/building up emergency fund even more before i venture into pensions/investing. Im starting to learn now as there is a lot of stuff to learn.