No idea where to start planning

BaconandEggs

I would like to start looking to the future and planning to put funds aside for retirement. I might have come to this a little late 36 years old. However, my focus has been on buying a house, reducing the mortgage and securing a decent job over the last few years.

I've put a low priority on saving for a pension. This is probably because hearing bad experiences from family members who paid into pensions for year that were then stripped, leaving them little in retirement. Many of my relatives have also not made it to retirement age, which has probably also had an influence on my lack of planning.

I have a defined benefits pension. This was a final salary pension until April this year. I've paid the default amount into this based on my salary for the last 6 years and recently opted to pay an extra voluntary 1%, which is matched by my employer.

How do people decide how much to put aside and decide on a particular age to retire? How much to people aim to have per year in retirement?

My pension scheme has a calculator online so I can see estimates of the amount I am likely to receive based on payments and age of retirement.

Apologies for the newbie questions.

LHW99

You are doing the right thing by contributing now, and by starting to ask questions.
Too many people don't think about it until they are almost at retirement age.

If you can afford it, put as much in to the pension as will get the maximum company contribution, but don't forget to put some emergency funds away too (if you haven't already) in case the roof blows off or you need a new boiler.

Theta101

How do people decide how much to put aside and decide on a particular age to retire?

I maintain a spreadsheet of my budget and work out what I NEED and what I'd LIKE and what is POSSIBLE.

I currently need £21,000 per year and any income above that is available to put into my savings for retirement.

From my spreadsheet and income I know I could end up with pension pots to the value of between £250,000 and £400,000 and retire between the ages of 65 and 67.

Currently I feel that a nice target to aim for is the £400K value by age 65.

I factor in deferring the state pension from age 66.
I factor in my wife's pensions also.

I'm currently putting as much as I can into employers pension scheme via salary sacrifice and separate SIPP's.

I work out that it's possible for me to retire on more than I need.

I started my pension pots when in my 30's, around 1988, then neglected pensions for years, only recently getting back to maintaining them, life gets in the way!

enthusiasticsaver

I started a spreadsheet too when I was around 35 and started keeping details off our pension statements and began allocating our savings into three pots. One was short term for immediate needs for car and house expenses, insuances, holidays, Christmas. One was medium term for replacement cars, furniture, home improvements, long haul holidays or more expensive trips and one long term pot. The long term pot was initially used up by paying extra contributions into my OH pension (10% at that time his employer matched it, in 2008 they took away final salary so incentive was they would pay 20% decreasing by 1% a year until reaching 10%) and buying added years using Avcs on my LGPS. Closer to retirement when mortgage repaid I opened stocks and shares isas too.

OH has just retired at 58 so we have a year to see how we cope with the £500 drop in his monthly income before I go too. I spent a day last week playing about with my pension calculator and we think I can afford to go in Feb 2018 when I am 58. The next year will be a test though on how we do on reduced income. We had been saving around £1k per month though so that is something to aim for. Try living on what you think you will get, ignoring mortgage as that presumably will be paid off. We are ignoring state pension for now. We have a comfortable savings buffer, low outgoings and regular pension income to cover necessary expenditure. Discretionary though can be problematic as we have been helping our daughters with childcare, house moves etc.

HinesBeans

How much to put aside depends on what you can afford. A good way to do it is have a set amount and then add any annual payrises or reductions in other outgoings so you don't feel any worse off.

HinesBeans

I also forgot to add. 36 isn't too late. It gives you plenty of time

tigerspill

HinesBeans wrote: »

How much to put aside depends on what you can afford. A good way to do it is have a set amount and then add any annual payrises or reductions in other outgoings so you don't feel any worse off.

There is an argument that does this the other way around. Pay savings first and live on the rest. i.e. save a fixed amount at the start of the month when you get paid rather than what's left at the end of the month.

somethingcorporate

HinesBeans wrote: »

I also forgot to add. 36 isn't too late. It gives you plenty of time

True, far better late than never.

atush

enthusiasticsaver wrote: »

I started a spreadsheet too when I was around 35 and started keeping details off our pension statements and began allocating our savings into three pots. One was short term for immediate needs for car and house expenses, insuances, holidays, Christmas. One was medium term for replacement cars, furniture, home improvements, long haul holidays or more expensive trips and one long term pot. The long term pot was initially used up by paying extra contributions into my OH pension (10% at that time his employer matched it, in 2008 they took away final salary so incentive was they would pay 20% decreasing by 1% a year until reaching 10%) and buying added years using Avcs on my LGPS. Closer to retirement when mortgage repaid I opened stocks and shares isas too.

OH has just retired at 58 so we have a year to see how we cope with the £500 drop in his monthly income before I go too. I spent a day last week playing about with my pension calculator and we think I can afford to go in Feb 2018 when I am 58. The next year will be a test though on how we do on reduced income. We had been saving around £1k per month though so that is something to aim for. Try living on what you think you will get, ignoring mortgage as that presumably will be paid off. We are ignoring state pension for now. We have a comfortable savings buffer, low outgoings and regular pension income to cover necessary expenditure. Discretionary though can be problematic as we have been helping our daughters with childcare, house moves etc.

Living on your projected retirement income for a year is very astute.

justme111

Familiarise yourself with your pension then so that you know what you already accrued, what would you accrued if you worked x years more, whether there are ways of buying additional benefits and what are the conditions for buying those. Think of what is a normal retirement age in your scheme and whether you would like to make provisions for retiring early.
Re how much - read a thread "the number".

cns06

I am similar in age to you.

Firstly I would learn as much about pensions as you can.

They are complex and rules can change a lot. If its a company scheme you need to also consider long term risks that may have.

Pensions have some great advantages, however they are not suitable for everyone and they are rarely a magic ticket to retirement unless you can afford to put large sums in. A £500k pension pot might if you are lucky return around £20k in retirement PA.

For me the biggest risk to people our age is the changes to retirement age. We may end up chasing the retirement age as we grow old. That will be no fun.

Second risk is poor performance or risk of major financial meltdown again. Every 20-30 years there seems to be a big problem..

Personally my strategy is to have 3 pots all with enough in them each to allow me to retire at my planned age. If all 3 do well I should have a very comfortable retirement. If they perform poorly then I will still be ok. If one fails all together I will still be able to have a decent ish retirement and if 2 fail then I would still be able to retire but would have to be very frugal - probably waiting for the other 2 pots to recover.

Pot 1 - property. Slow to access the funds but can provide an income (rental) or lump sum (sale). Tax rules are risks. May be at risk to market bubbles.

Pot 2 - pension. Impossible to access the money until the state permits. Tax rules are risky, plus growth has been poor the last 5 years. Stock market crashes are risky esp 2-3 years from retirement.

Pot 3 - cash. Instant access. Not much growth. Virtually untouched by any market risks and tax free.

I am currently trying to boost pot 3 as I personally think its going to be the hardest to accumulate but also the most useful once I get close to retirement.

Pot 3 used to be stocks and shares (ISAs and actual own shares) but I have found this to be too risky now and my pension is the most exposure to markets I want. I do not even count the SP as any part of my plan as I think SP age will be >70 for me.

FWIW I plan to retire in c.15 years. It takes work and research and you must be able to make some decisions at critical times not sweep it under the carpet. I would put at least 2-3 hours a month to one side to look over all your spreadsheets and ensure you are on track.