Age/Pension Pot

dtaylor84

MoneySaverLog wrote: »

£9,000 a year for sky :eek:

It's not £9,000 a year. It's £9,000 forever (with various assumptions about inflation and market performance).

hugheskevi

Looking at Sky alone, their complete package, including line rental, sports, movies, broadband and phone costs £89.25 per month. That's absolutely ridiculous and I'd probably do with a cheaper package in retirement - but I don't want to be forced into going for a cheaper package at a time when I'm most likely to spend more time at home. There's a £26,755 pot required on it's own....

It is also coincidentally almost exactly the amount an 18 year old would have to contribute to get a £35,000 pension pot at age 35

That's more than £61,755 you could have for retirement by skipping the full Sky package between age 18-35 and in retirement

Mind you, I don't understand how anybody can ever attain a full Sky package between 18-35 without exceptional luck (for those who read the other thread...)

grey_gym_sock

marathonic wrote: »

An interesting thing I done with my budget spreadsheet is add a column with 'Projected Pension Requirement in Todays Money'. I use a 4% drawdown rate in retirement so multiple the annual cost of an item in my budget by 25 in this column.

this is exactly how i look at most outgoings: how much would it cost to keep up this expenditure indefinitely?

(the capital required doesn't have to be in a pension fund to make the calculation relevant.)

Basically, if I have an expense like Sky TV costing £30 per month (£360 annually) and I want to keep this in retirement, it'll require a pension pot of £360 * 25 = £9,000.

however, in this case you should also add in the on-going cost of all the extra things you'll want to buy as a result of watching all that TV

planteria

hugheskevi wrote: »

For me, the target is not the size of pension pot, but the size of overall savings................So working from left to right and optimising amount put in based incentives, my priority order is:

agreed re. overall pot. i am prioritising ISA first, as it happens, but i intend to build up a subtantial pension pot in it's own right.

3-6 months precautionary savings > 10-25% equity in property > pension > 40% equity in property > ISA > mortgage > unwrapped investments

interesting. i have some cash, but have plenty of available credit on cards, so i dont really feel a need for a cash buffer.

i dont quite get the Property>Pension>Property idea

hugheskevi

i dont quite get the Property>Pension>Property idea

I mean that first priority for money available for saving is to build up precautionary savings of 3-6 months, once that is in place then a house deposit (10-25%) as got to get on with life even if it may not quite be the most efficient thing to do.

Next priority is to exploit best part of pensions (employer conts and higher rate relief), with money left over after that look to pay down mortgage so as to build up equity of 40% to get lowest mortgage rates.

With money remaining after that, look to use up annual ISA limit, then with money left over after that look to pay down rest of mortgage, and after that use unwrapped investments.

At younger ages you won't get too far into that list, at older ages you should be able to get deep into it each year as the first priorities have been met. At the moment I get to ISAs, but not yet maxing them out.

Reue

Personally i followed the "half your age that you start as a %" guideline

planteria

hugheskevi wrote: »

I mean that first priority for money available for saving is to build up precautionary savings of 3-6 months, once that is in place then a house deposit (10-25%) as got to get on with life even if it may not quite be the most efficient thing to do.

Next priority is to exploit best part of pensions (employer conts and higher rate relief), with money left over after that look to pay down mortgage so as to build up equity of 40% to get lowest mortgage rates.

With money remaining after that, look to use up annual ISA limit, then with money left over after that look to pay down rest of mortgage, and after that use unwrapped investments.

At younger ages you won't get too far into that list, at older ages you should be able to get deep into it each year as the first priorities have been met. At the moment I get to ISAs, but not yet maxing them out.

thank you for the explanation. good stuff.

i have very broadly paid taken my last year's income and split it fairly equally between ISA, Pension, Debt Reduction and Living.

if an annuity were to be purchased at 5% then a £50k income would obviously cost £1m. i think a 'Million Pound Pension Pot' sounds unrealistic to most people, but getting somewhere near to that, perhaps with other investments taken into account alongside, is needed for a really comfortable lifestyle, taking into account i have c.30yrs 'til retirement and inflation will be very significant over that time frame.

marathonic

Reue wrote: »

Personally i followed the "half your age that you start as a %" guideline

Your career choice could have a significant impact on this. For example, if you start on a very low, trainee-type, salary and it doesn't rise rapidly until later in life, you could see a very sharp drop in lifestyle in retirement.

However, I do agree that it's a good 'rule of thumb' and shows a lot of people how inadequate there current (or starting) contributions were.

My company contributes 4% up until the age of 30 if we contribute 2%. That's a total of 6% and is the level most people in my company pay - and none of my work colleagues are 12 years old

From 30, it increases to 3% and 6%. Still not enough.

grey_gym_sock

planteria wrote: »

if an annuity were to be purchased at 5% then a £50k income would obviously cost £1m.

though for somebody living off a £50k salary today, out of which they make pension contributions, pay a mortgage, and costs related to their work (travel, work clothes), and higher costs related to the lack of time they have while working, they probably won't need £50k income in retirement, when all those costs have dropped out.

you also don't pay NI on a pension, unlike a salary.

£50k pension might be what somebody used to a £80k salary would aim for. though it's very much a lifestyle choice - you could want a lot more or a lot less than that.

jem16

planteria wrote: »

if an annuity were to be purchased at 5% then a £50k income would obviously cost £1m. i think a 'Million Pound Pension Pot' sounds unrealistic to most people,

I'm not sure that most people would require £50k in retirement. Many don't earn that whilst working.