Early-retirement wannabe

SnowMan

nicknameless wrote: »

Anyway no more thread derailing from me.

A reassuring 'meanwhile back in the real world' intervention all the same :beer:

Tancred

gadgetmind wrote: »

50% isn't necessary and 15%-20% from an early age is fine.

So, if you earn £30k, then lob £6k into a pension, live on the rest, and consider putting the thick end of any pay rises into the pension too.

Or ignore the issue, spend every penny you earn, and do nothing but moan.

Hmmmm. £6k a year for 40 years = £240k. What does that buy you: an inflation proofed annuity of maybe around £7,500 at age 65. So much for early retirement.

jimi_man

I'm not a great expert but I would have thought that you would get some growth on that figure. At about 5% growth over the whole term you would probably end up with 3 times that amount, about £750,000. Obviously inflation plays a part but most people's pay goes up with the cost of living over the long term, so if your pension payments increase with inflation then that should account in part for that.

Also I don't think you pay £6000, depending on your tax rate you would pay somewhat less than that.

peterg1965

Tancred wrote: »

Hmmmm. £6k a year for 40 years = £240k. What does that buy you: an inflation proofed annuity of maybe around £7,500 at age 65. So much for early retirement.

Hang on that's a little simplistic, wisely invested there will be a
LOT of compounding in there. Say you had an average of 6% growth per year over 40 years and increased your annual contributions by 2.5% every year. Your pot will be a smidge over £1.35 million, rather more than just your overall contributions, and enough to fund a comfortable retirement I would suggest.

And all for an Initial personal contribution of 'just' £400 per month.

tell_it_how_it_is

Appreciating you've put your 'just' in inverted commas, your suggestions too are a little simplistic in my opinion, for a fair percentage of us mere mortals.

It's all well and good saying how easy it should be when you're reasonably well off, but for most of us, slapping around £400 a month into a pension pot is just not viable.

And bumping up by 2.5% is also a no-no for many, who are finding bills rising astronomically while not seeing a pay rise for years (six in my case). You could argue in lots of cases that reducing by 2.5% per annum would be more realistic!

I myself would love to retire at 55 (I'm 42), and I'm doing all I can to work towards it. However, it is a struggle, and there's every chance it might not come off - it certainly won't be a retirement of riches if it does.

One has to also live and enjoy treats as you go along. For me, there's no point sacrificing loads of things as you move through your daily life just to look towards a retirement you might not even reach.

gfplux

I want to add one important point that I had almost forgotten having retired so long ago.
Mortgage free was one of the most significant steps in my life. Those of you with mortgages just can not (you might think you do, but you don't) imagine how this frees the mind and spirit.
I became mortgage free some years before retiring early and being free made so many of the other decisions very easy.
For me that was one of the big turning points in my life.

gadgetmind

Tancred wrote: »

Hmmmm. £6k a year for 40 years = £240k.

Try plugging those numbers into a pension calculator and I think you'll be surprised. You haven't allowed for any growth or compounding, which represent the bulk of the pot for those that start early.

I just ran some numbers for saving from age 20 and retiring at age 60 and got an annual income (not counting SP) of well of £20k pa. OK, so not exactly life of luxury, but surely much better than having to work until you drop and then try and life off state pension alone?

I know which I'd choose to do.

peterg1965

tell_it_how_it_is wrote: »

Appreciating you've put your 'just' in inverted commas, your suggestions too are a little simplistic in my opinion, for a fair percentage of us mere mortals.

It's all well and good saying how easy it should be when you're reasonably well off, but for most of us, slapping around £400 a month into a pension pot is just not viable.

And bumping up by 2.5% is also a no-no for many, who are finding bills rising astronomically while not seeing a pay rise for years (six in my case). You could argue in lots of cases that reducing by 2.5% per annum would be more realistic!

I myself would love to retire at 55 (I'm 42), and I'm doing all I can to work towards it. However, it is a struggle, and there's every chance it might not come off - it certainly won't be a retirement of riches if it does.

One has to also live and enjoy treats as you go along. For me, there's no point sacrificing loads of things as you move through your daily life just to look towards a retirement you might not even reach.

I was merely responding, in a general manner, to the earlier post which was highly misleading. I was not suggesting, or making the wider observation, that every 25 year old should, or is able to put aside £400/month - you have done that.

Having said that, it is not beyond the scope of people in jobs earning a reasonable income to put aside a small sum each month, in a lot of cases in combination with an equal or more contribution by an employer, to build up a substantial pension fund over a 40 year working life. I appreciate that there are many financial pressures over the years - mortgages, children, job changes, which mean a set pattern of pension saving cannot be constantly maintained, but as many of have said earlier, it's all about choices.

Linton

tell_it_how_it_is wrote: »

Appreciating you've put your 'just' in inverted commas, your suggestions too are a little simplistic in my opinion, for a fair percentage of us mere mortals.

It's all well and good saying how easy it should be when you're reasonably well off, but for most of us, slapping around £400 a month into a pension pot is just not viable.

And bumping up by 2.5% is also a no-no for many, who are finding bills rising astronomically while not seeing a pay rise for years (six in my case). You could argue in lots of cases that reducing by 2.5% per annum would be more realistic!

I myself would love to retire at 55 (I'm 42), and I'm doing all I can to work towards it. However, it is a struggle, and there's every chance it might not come off - it certainly won't be a retirement of riches if it does.

One has to also live and enjoy treats as you go along. For me, there's no point sacrificing loads of things as you move through your daily life just to look towards a retirement you might not even reach.

If you cant afford to put a reasonable amount into a pension now how will you manage after retirement when your income will be much lower? Perhaps a better approach would be to put enough into a pension such that your standard of living is unchanged when you retire.

As to not living to retirement, current government statistics predict that only about 6% of 42 year olds wont reach 65 and 30% wont reach 85. Basing your finances on dying early doesnt sound like a very good bet to me.

atush

Tancred wrote: »

Hmmmm. £6k a year for 40 years = £240k. What does that buy you: an inflation proofed annuity of maybe around £7,500 at age 65. So much for early retirement.

If you are thinking there will be zero investment growth, and zero dividends in those 40 years, I think you'll find yourself wrong