Planning for younger people

dunstonh

Also, how do you decide how much to put into general savings as opposed to a pension?

Pension is for retirement. Savings are for the next few years. So,it should be easy to segment that. There is also the medium term where S&S ISAs can come into play (they can also fit long term needs)

I will let others cover online calculators as I use a commercial one that has a wide range of scenarios and would be more detailed and flexible than the online freebies. However, at your stage, the online freebies should be fine as long as you understand the assumptions.

Rosemary7391

dunstonh wrote: »

Pension is for retirement. Savings are for the next few years. So,it should be easy to segment that. There is also the medium term where S&S ISAs can come into play (they can also fit long term needs)

I will let others cover online calculators as I use a commercial one that has a wide range of scenarios and would be more detailed and flexible than the online freebies. However, at your stage, the online freebies should be fine as long as you understand the assumptions.

I know the difference between savings and a pension, I can work out roughly how much I'd like for each. I guess I'm trying to decide how quickly to fill each. Thanks for the reminder to check assumptions - I ought to remember given the day job but it helps to be reminded occasionally!

JoeCrystal

Rosemary7391 wrote: »

I thought I'd best start a new thread rather than derailing the other one.. I'm currently 25, a student but I'd like to have some sort of plan to retire eventually. Online pension calculators don't seem to work very well; they assume a fairly fixed income, so calculated I needed to save £500/month to get the retirement income I'd like. Great, that's half my current income, but less than 20% of what I expect to be earning later in life... So, are there any calculators that allow you to vary the amount you save over time? Or do I need to make my own?

Also, how do you decide how much to put into general savings as opposed to a pension? It's all very well having a pension, but I can't pay for building repairs with it, eat from it or fund jobsearch expenses when I'm unemployed, it won't help me move house after finding a job - I need accessible savings for those things.

Thanks for any suggestions or thoughts
Rosemary

Well, I decided to set up my own private pension scheme five years ago with an IFA at 25 while lurking in this pension forum for a while and realising that my employer didn't even have one. One of the best decision I ever made. It is coming along okay, not brilliant but lot better if I didn't bother setting it up.

You do all the savings (both general and pension) as best as you can as long there is enough of both going into it. In the past, I usually pay 25% of my salary into the pension scheme but cut it back to 10% of the salary in order to overpay the mortgage instead. I do however keep an eye on the pension shortfall amount with an intention of paying the rest in if I got better income in the future.

kidmugsy

I know quite a few academics who have retired early (i.e. about age 60), thoroughly fed up with what's happened to the academic world. It's no consolation that much of the problem seems to be self-imposed, as the universities plunge themselves further into bureaucracy and managerialism.

One friend simply generalises that nobody of high intelligence and high spirits should dream of entering an academic career. What else he should do is not spelled out, I must admit.

Rosemary7391

kidmugsy wrote: »

I know quite a few academics who have retired early (i.e. about age 60), thoroughly fed up with what's happened to the academic world. It's no consolation that much of the problem seems to be self-imposed, as the universities plunge themselves further into bureaucracy and managerialism.

One friend simply generalises that nobody of high intelligence and high spirits should dream of entering an academic career. What else he should do is not spelled out, I must admit.

Yes, I'm concerned about the direction things are taking but what can be done? It certainly isn't being imposed by the academics, and I can't think of another career that would combine the two things I enjoy, teaching and research. I could possibly get one or the other, but both? If it gets too bad here I can up sticks and move country, that might help. Or not.

I've made a little python script to play with the changing amounts of regular savings, spreadsheets aren't my thing but if anyone wants it I'm happy to share. Now just need a crystal ball to work out what numbers to put in it!

Jamesd, I've started by using your figures, I'm actually only looking for around £24k/year in retirement (assuming I've paid off the mortgage). Based on that I needn't worry just yet, I'm happy to keep working until I'm 75 anyway, and putting in £50 a month now makes less than £1k/year difference at the end. I'm better off keeping that in a savings account for now.

I had a look about stocks and shares ISAs, but the fees seem to be quite high. How much would people think I needed before that was worth doing? Obviously not with my emergency fund, but with overages that I hopefully won't need but would prefer to retain access to (so money deliberately not going into the mortgage or pension).

Thanks for all the help and comments, much appreciated

atush

Thanks atush. I do have 6 months living expenses saved, although that pot has to cover a few things in addition, like repairs - I own a flat. It also covers travel/holidays

OK, so you have 3 month saved, and a separate amt equal to 3 month for replacements, repairs and travel/holidays?

That seems fine, so you could explore your S&S isa allowances. The main difffernce between S&S isa and pension is the tax relief boost the pension gets, but also the growth of the investments over time (which are both in a tax free environment but a tiny oost to pension here).

So, in your case, as you dont work really, i would look at S&S isa allowance in global trackers or Vanguard series. This would be able to be transferred later into a pension once you have the relevant earnings.

In the meantime, you could, if you wanted to, put 2880 a year into a pension which is grossed up to 3600 with TR from the govt. Or should you work at all, your entire earnings if they are more than 3600.

but as a home owner with 3 months +plus emergency pot, w/o any earnings i'd concentrate on S&S isas for the flexibility they will provide for someone of your age.

atush

I can't think of another career that would combine the two things I enjoy, teaching and research.

What exactly is your field of expertise? What do you teach/research?

AS a former biologist I can understand the low pay of some areas of research but it would be helpful to know yours?

Rosemary7391

atush wrote: »

OK, so you have 3 month saved, and a separate amt equal to 3 month for replacements, repairs and travel/holidays?

That seems fine, so you could explore your S&S isa allowances. The main difffernce between S&S isa and pension is the tax relief boost the pension gets, but also the growth of the investments over time (which are both in a tax free environment but a tiny oost to pension here).

So, in your case, as you dont work really, i would look at S&S isa allowance in global trackers or Vanguard series. This would be able to be transferred later into a pension once you have the relevant earnings.

In the meantime, you could, if you wanted to, put 2880 a year into a pension which is grossed up to 3600 with TR from the govt. Or should you work at all, your entire earnings if they are more than 3600.

but as a home owner with 3 months +plus emergency pot, w/o any earnings i'd concentrate on S&S isas for the flexibility they will provide for someone of your age.

I do work very occasionally doing exam invigilation, but certainly not more than £3600 over the year, more like £300 (certainly not enough to justify the SLC thinking I've ditched my PhD, but there's no convincing them!). My income is reasonable (~£14k with no tax) but it isn't employment income nor is it taxed so it doesn't count for pension tax relief.

I do think something like a S&S ISA is the way to go once I've enough to make it worthwhile. I should add, that the building I live in needs some quite expensive repairs - currently the other owners don't care so they're not getting done, but I suppose it isn't beyond imagining that they might realise and want to get it done before I move. So having accessible savings seems sensible just in case.

I'm in theoretical physics, quantum information and quantum optics. I wouldn't be fussed about low pay if I was certain I'd get it! Having to do 2 or more postdocs before I can settle doesn't appeal, but I want to do the work. There are a few industry research positions, but they don't come with teaching as far as I'm aware.

bigadaj

You can pay in £2880 and get it grossed up to £3600 even with no income.

It is locked away until 55, or probably later, but is a form of free money.

jamesd

Rosemary7391 wrote: »

I had a look about stocks and shares ISAs, but the fees seem to be quite high. How much would people think I needed before that was worth doing?

Anything. Get started as soon as you can. Not because it would achieve a high value but because you need to learn the feelings of being invested during good and bad times to prepare you for what happens when larger amounts of money are involved. The emotional effects are significant and can cause you to make crucial mistakes like selling near market lows or buying near market highs with lump sums. You also need to work out what sort of volatility in value you can stand to help you to pick how to invest.

It's completely normal for there to be a 20% drop in the UK stock market two or three times a decade and 40% once or twice a decade and you'd historically have obtained 5% plus inflation average annual returns. But can you deal emotionally with such drops even though you know the long term outcome? No way to really know until you've been there with real money at stake. So get started with at least something while the cost of finding out is low.

Places with percentage-based fees are quite common, like say Hargreaves Lansdown. Very cheap when you don't have much money invested.

Rosemary7391 wrote: »

I'm happy to keep working until I'm 75 anyway, and putting in £50 a month now makes less than £1k/year difference at the end. I'm better off keeping that in a savings account for now.

Yes, for now. Longer term you might consider setting things up to give at least the chance of retiring at 50 or 60. A lot of people do end up finding that they dislike their job and it's nice to have the option.

To some extent you get that almost free if you have a somewhat different objective: being able to live long term without benefits. That gets you a good way there, then financial independence is something that a fair number of people find they like to do, which means getting to the point where you can do that at an income you like if you were to stop working. Later still might be the level at which you'd choose to retire unless you just enjoyed your job. What this sort of thing can get you is the freedom to choose. I started on it in 2005 after spending all of my savings doing a very worthwhile full time bit of volunteering and it'll give me the freedom to choose to do that without running out of money again. No need now for me to be upset if I was to lose my job, even though it's one I find fine and am content to carry on with.