21 Year Old trying to save for retirement.. Opinion?

emmaur1

Hi everyone,

I am 21 years old with a repayment mortgage of approx £76,000 fixed at 4.99% for 3 years then i can switch to the next best rate.

I earn approx £19,000 per annum.

I have at least 3 months emergency fund built up.

I have a Maxi Isa that i started in May 2007. This has £2000 in it and i contribute £250 per month. It is spread across the following:

UK Growth Fund
UK Equity Fund
UK FTSE 100 Tracking Fund
Corporate Bond Fund
UK FTSE All Share Tracking Fund
International Growth Fund

I was just wondering if i am doing the right thing by saving for my retirement so early?

If anyone has any idea what the fund may be valued at when im say 50-60?

Also any ideas if this is a good retirement strategy on the whole and any suggestions?

P.S. I am aware that it is against the rules for you to offer Financial Advice as such but would like some experienced members opinions and suggestions.

Thanks greatly for any replies in advance

Regards

Andy

dunstonh

I was just wondering if i am doing the right thing by saving for my retirement so early?

You are not doing wrong that is for sure.

If anyone has any idea what the fund may be valued at when im say 50-60?

Your fund spread is rather limited and the use of trackers reduces the potential growth so I would work on the basis of 7%p.a. with that spread.

Also any ideas if this is a good retirement strategy on the whole and any suggestions?

Its rather basic and a variation of a theme. What is your strategy for choosing the funds? Its not sector or asset allocated, its not high yield. It seems like a random pick.

If anyone has any idea what the fund may be valued at when im say 50-60?

30 years of that would be just over £300k at 7% p.a. You would of course, have to increase the monthly contribution annually by inflation to give that £300k a real terms value.

Its a great start and pat yourself on the back for that. However, you should look at the spread of funds. a 2% a year difference in performance would see that £300k increase to over £430k

emmaur1

Thanks for that.

What sort of funds should i look for?

Also i reinvest any dividends i presume this is much better than taking them out?

I would have to agree that its very basic. I am a beginner to this so was just wanting to see how it all works before jumping in at the deep end.

I am open to all suggestions on how i can make my money go further.

I was hoping to move abroad when i retire so i will probs need a quite substantial amount.

cheggers

emmaur1 wrote: »

Hi everyone,

I am 21 years old with a repayment mortgage of approx £76,000 fixed at 4.99% for 3 years then i can switch to the next best rate.

I earn approx £19,000 per annum.

I have at least 3 months emergency fund built up.

I have a Maxi Isa that i started in May 2007. This has £2000 in it and i contribute £250 per month. It is spread across the following:

UK Growth Fund
UK Equity Fund
UK FTSE 100 Tracking Fund
Corporate Bond Fund
UK FTSE All Share Tracking Fund
International Growth Fund

I was just wondering if i am doing the right thing by saving for my retirement so early?

If anyone has any idea what the fund may be valued at when im say 50-60?

Also any ideas if this is a good retirement strategy on the whole and any suggestions?

P.S. I am aware that it is against the rules for you to offer Financial Advice as such but would like some experienced members opinions and suggestions.

Thanks greatly for any replies in advance

Regards

Andy

Great start mate, I wished I'd been lucky enough to build up all that by 21.

You cann't have much money left over after paying £250 a month into an ISA and mortgage payment of say roughly £448.91 a month, plus bills can you???

IFA

Well done, I wish I'd started that early and not bothered wasting years going to uni..

JDinho

You don't mention any pension fund. Perhaps your employer has a scheme? They may even contribute for you. You will benefit from Income Tax relief on any contributions, unlike your ISA.

Another benefit is that you cannot spend the contributions you make, helping to preserve the capital you have accumulated... the downside you can't easily get at it once it's there.

emmaur1

No i dont have a pension fund and my employer (Land Rover - skinflints!) dont offer a company policy.

I did contemplate going down the pension route before i took my ISA out. But with me wanting to move abroad when i retire, i will need access to my money easily.

I have very little left in my bank account after paying everything (I just class my ISA payment as another bill)

But from my experience most people who have money in there bank account just end up either peeing it up against the wall or spending it on rubbish that they dont really need.

So far all the replies i have recieved seem positive so i presume i must be going in the right direction.

someone

Just a quick question, when would the best age be for starting retirement stuff? It's just that I read some place that putting it off by like 5 years costs your a lot of money.

emmaur1

It is best to start as early as possible because the longer you leave it the more you have got to invest to catch up.

This has a lot to do with compounding of interest i think.

As you can see i have started already. How old are you at the minute?

I am sure some of the more experienced investors will be able to nudge you in the right direction.

dunstonh

There used to be a rough rule of thumb that a 5 year delay could halve your final fund value. That was back in the days of high inflation/higher tax relief and higher returns. It wouldnt be half nowadays but still a fair chunk.

£250pm for 30 years @7% = £294k
£250pm for 35 years @7% = £430k

In income terms that is £14,700 income on the first one but £21,500 on the second.

Mr_Mumble

The Fool has plenty on the miracles of compounding, check:
http://www.fool.co.uk/10steps/step1.htm
http://www.fool.co.uk/school/compound.htm

and this recently broadcast retirement podcast:
http://www.fool.co.uk/money-talk/retirement-pensions/2007/08/01/how-to-build-a-healthy-pension-pot.aspx

Andy,

Will you be able to cover the cost of the mortgage after the 3 year fixed-term if the base rate goes up another percent or two? You don't want to be in a position where you have to sell equity funds at the wrong time.

Is the emergency fund in a standard deposit account? Since you are not using the full S&S ISA allocation you should look to put the emergency fund into a cash ISA next tax year along with the £250 pm into a S&S ISA.

There is a lot of overlap in the funds chosen. The FTSE-100 makes up 83% of the FTSE-All Share so there will not be much deviation between those two tracker funds.

The UK Equity fund (and to a lesser extent the UK growth fund) could have the same companies dominating the portfolio as the trackers do. There is nothing wrong with the likes of BP, Shell, Glaxo, HSBC and RBS (indeed I agree with many commentators who think big UK blue-chip offers great value at the moment) but it isn't a varied selection.