Save for pension in early 20s - but house deposit, etc?

dunstonh

HardCoreProgrammer wrote: »

For a different perspective from the other posters, I answered a similar question recently in https://forums.moneysavingexpert.com/discussion/comment/70217406#Comment_70217406

Your pension will only make a difference to you if you live to retirement age (whatever it may be in 40 years time), but buying a house will improve your quality of life right now.
And do not forget that if you get on the housing ladder early, the increase in house price could outweigh the value of employer contributions to your pension.

Seeing as 5 out of 6 people will make retirement, it seems that living for today is not playing the best odds. Sorry, but what you say in respect of the employer contribution is wrong. Free money should virtually always be taken. Nothing beats free money.

The earlier you start, the less it costs you on a monthly basis. Putting off until tomorrow is not a disaster but you need to realise that putting off until tomorrow is going to eat up most of your money when your mortgage is gone. Plus, think of all that free money lost. you will never make that back up.

atush

marlot wrote: »

I thought that when I first got married, in 1989. I spent every penny I owned on the house purchase (100% mortgage, but there were other bills) and the wedding. Mortgage rates then went up to 12% and took all my take home pay. And my house value plummeted by a third.

The house value falling wasn't a problem until I got a new job elsewhere in the country, but it really hurt.

I am concerned that after 8 years of very low mortgage rates, that people are becomign complacent - the housing market could go horrible again.

Well the WE papers have said the london market is stalling right now. So property isnt a one way bet.

TheTracker

worried_jim wrote: »

OP- I started my pension in 1991 aged 18 on a salary of £8500 and have over £100k now in funds. Start your pension now- it will be one of the best financial decisions you ever make, the years soon fly by.

I'm with HardCoreProgrammer. Not starting a pension until my mid 30s was the best financial decision I've ever made. It allowed me to invest in my career and save a large deposit for the house I wanted. My second best decision was not buying a house until my mid 30s. Since my mid 30s I could save 100k+/year of employment income. I truly doubt I'd have been in this position had I bought a house in my 20s or contributed double digit salary percentages to a pension in my 20s.

We all have different perspectives and life circumstances. I wouldn't put too much relevance into what other forum posters did, it's all very personal. What's important is you think seriously and make a decision that you are comfortable with, not one that other Internet forum posters are comfortable with.

atush

But there are consequences to some personal decisions that the OP and others need to think about. such as those who dont start saving for retirement until their 50's, and those that save for retirement in cash.

Once they know all the facts, then you can make that individual decision.

We didnt start saving for retirement until late 30's. While we are OK now, this is basically down to a higher than average annual income. 2 of my 3 are out of uni working graduate jobs, both started pensions at 21/22. My 21 yr old started his in this month, and has a 14% contribution rate (half his and half the employer).

The rest of his income is saved while living at home this year (minus a very small rent and living costs). So he can save for a property to buy or anything else.

Just because we waited so late, doesnt mean we think it is a good idea for our kids to.

dunstonh

putting off until your 50s is a viable option. Some people have made a successful go of it. However, it has consequences.

1 - It requires strong financial management and commitment as the amounts you will need to pay in your 50s will be large.
2 - you are effectively using money in your 50s to pay for your lifestyle in your 20s and 30s. Your 50 year old self will not thank your 20-30 year old self.
3 - If you opt out of the workplace scheme then you will have lost a fortune in free money. If you go with the later years option, then do at least opt in and get maximum employer contribution at the very least.

d70cw6

im 36 and currently paying 21% (and 12% from employer) into my DC fund. Even then I'm not sure it'll be enough for when i want to retire at 60.

surbitonian

Always, always, always take the free money that goes with pension contributions from your employer plus tax-free money from the Government. That may not last for ever but you'd be silly not to take it while you can.