Sacrificing today for a bit more tomorrow ......

uk1

There are so many threads that have at the heart of them a need to make sense of the rather wide and blurred and almost impossible to answer question of "is it worthwhile for me to give up this pleasure today in order to have the uncertainty of this uncertain benefit in the future?".

It is behind so many simple questions such as "should I defer?" Or "Is it worthwhile making any effort whatsoever to save in a pension now when I do not know what I'll get - or even if I'll be alive?".

For example a 25 year old forgoing the pleasure of a £500 holiday each year and saving it. Is it worth it? How could that sacrifice change his or her life presuming for example they invested wisely and retired at 67 having paid off a mortgage? How could that pot change their lives when they are mortgage free compared to their lives today when disposible cash after mortgage now is so small? Is it worth the sacrifice? How will I feel with that extra cash then compared to now?

It occurs to me that there has never been a better time in the whole of time either up to now or that will follow for a Brit to be a pensioner, particularly those that were in final salary defined benefit schemes. Younger people today may not appreciate that in fact they may never actually retire. Our parents didn't have this level of income or disposible income that many of us have and nor will probably our kids it seems to me as a rather rash generalisation.

I thought I'd float the idea of a thread with a more philosphical base than the"let's compare this return with that return" type thing. A making sense of the complex issue of "jam today" rather than "jam tomorrow" type thing for those pondering about such things. I say it because it seems to me that many do not pass through that thoughtful stage first. Many do not go on to "how do I achieve what I have now decided I want to achieve" because they haven't thought through the rather long and hard complex issues like what it is they really want later in life and therefore how they might achieve it by starting something now.

Anyone interested? Or is it just me and the ramblings from a wine box type thought?

Jeff

kidmugsy

What some people want is to splurge money now and then sponge on the taxpayers later. Few are prepared to admit it, though.

jerrysimon

For me it was a complete accident/outside my thought process that at 17 I was signed up to a Civil Service final pension salary scheme. I never even thought about pensions until well into my 30s. I did however make a concious decision several times when looking for a new job, to stay within the public sector when I balanced higher earnings from the private sector against retaining a pretty much non contributory (1.5%) pension.

My father was retired again from the Civil Service at 60 and drew a half salary pension for more than 23 years. When he then got to 65 he was earning more than I was with his pensions than I was in full time work!

Unfortuanately my mother died a year after he retired but my father then visited and stayed (with relatives) in Australia for up to 3 months at a time over 12 times in the first 13 years.

All this thought process would be simple if we only knew when we were going to die. Of course for me making provision for my wife is also very important.

PS My father also paid of my mortgage for us when he died

Jerry

RickyB2000

I am thinking about something similar at the mo. I have contributed my planned pension contributions and don't have any spare cash to make more. But I can still contribute and the tax relief looks pretty juicy. So do I borrow cheaply to take advantage of the relief now and pay it back with the next pay check or two (easily done). Or do I leave it.

On the leave it side, I have no idea on the future. What if the tax rate in retirement (30 odd years away) jumps up so I am net worse off. Then it is a waste..... What if I die before I can take it? What if the government makes it 70 before I can access it (I want the option to retire young).

Would I be better saving this money outside the pension instead? Would I be better just spending it. I don't trust the government to stop screwing around with things, it is just watching the cash top up in my SIPP that makes it so appealing. I will kick myself if I forgo the fancy cars and house now to save and then be no better off than those who bought the fancy cars and house and didn't save!

chiefie

Its a gamble. My view is the closer you get the more incentive to save when really the opposite is generally better. If you are the type of person that spends their monthly pay cheque quickly you are unlikely to invest for the long term.my incentive is I don't want to br a slave wage till I drop so I'm willing to save some while my dh would prefer to spend now. An interesting combination ! She does see a lot of death in her job and so has the view you may never get there 😁

uk1

This "I might die earlier and so therefore death might cheat me out of money I could otherwise enjoy today" is an interesting one.

I find myself going for more walks because I am determined to cheat the government out of as much as possible of the deferred SP as we can.

I wonder whether making the provisions may subliminally make those that do take more care of themselves and whether those that do not tend not to and be a touch fatalistic with their health as well as their cash?


Jeff

Thrugelmir

uk1 wrote: »

For example a 25 year old forgoing the pleasure of a £500 holiday each year and saving it.

Not just a question of saving it. Reducing the amount of borrowing during ones lifetime makes life far less stressful and makes the money one has go far further. A holiday is state of mind. Not the amount of money one spends.

stormbreaker

If you can't afford don't borrow, don't buy.

The only debt I ever had was my mortgage.

Live for today, tomorrow is not a given!

A lot depends on age when it comes to opinions on what matters.

A dear friend deferred his state pension, retired at 70 and died last week 71.

uk1

Thrugelmir wrote: »

Not just a question of saving it. Reducing the amount of borrowing during ones lifetime makes life far less stressful and makes the money one has go far further. A holiday is state of mind. Not the amount of money one spends.

I think you highlight one other generational difference. The generation who are retired or retiring were brought up to believe you "saved up" for a holiday whereas the generation(s) that followed believe you put the holiday on a credit card and pay for it hopefully in the future.

Jeff

Goldiegirl

I think it's a question of balance.

Have some jam today, but also prepare for the future, so you can continue to have jam tomorrow too.

We've never been big earners, but started thinking about retirement quite early.

But life is long, and it would be very tough to focus on some arbitrary date in the future, without having fun on the way.

So we lived reasonably most of the time, but were able to have good holidays in the USA while we were younger, and moved on to cruising when we got a bit older.

Now that we have been able to retire we do longer cruises - we've just come back from a 5 week cruise.

I think it is a mistake to concentrate solely on the future. I've noticed that the 'jam tomorrow' types get the habitual saving so ingrained, that when the future finally arrives, are literally unable so spend of their amassed money, as they are so used to frugal living, and feel guilty about spending anything on pleasure.

uk1

Goldiegirl, those are extremely wise words, particularly from someone who clearly did manage things extremely expertly ...... to have both lived well whilst not being big earners as well as putting enough by for a 5 week cruise having retired early! That's impressive.

I guess that to me it is the point of where that balance has to change for later generations. Those who will live longer with proably a contracting welfare state?

It is wrong to be an extreme saver and not know how to enjoy. It is probably worst to make too little provision it seems to me.

Jeff