Planning for retirement at age 25 - anyone else?

MallyGirl

I joined the company pension FS scheme at 21 when I started but it was only a stop gap to the full one which started at 25. I left there at 26 but the little I contributed will still give me £1600 pa.
Next company had no pension so I started a personal one, and then took out a top up when the adviser said it wasn't going to be enough. I now know that quite a lot of fees etc went to the adviser but it was better than nothing. Next job, and every one since, I have joined the scheme on offer and paid enough to get the maximum employer contribution. Only in the last couple of years have I upped this considerably.
I wish I had contributed more as soon as I hit HRT but there you go. Planning to retire at 60 now.

NoMore

I started work 30 years ago, on first day got loads of forms to sign.

I was young and naive and just signed everything they put in front of me without reading or understanding. One of which was me agreeing to join the very generous DB pension.

Still with the same firm and that DB pension is looking great.

Best financial decision I ever made

atush

My sons are round your age. Cant say how much they are 'planning', but they all 3 have good employers pensions with quite a bit going in. One even has a DB pension, but will be leaving that job around 2 years into it so will have a Deferred CS pension.

They are putting in enough to get the max employer contribution then saving the rest so they can buy a home etc. Two are already starting to invest.

Zorillo

I joined the company DC scheme at 22 and all I've ever done until my current employer is contribute enough to receive the maximum employer contributions. My current employer isn't especially generous in that regard so I now contribute more than the minimum, and will gradually increase that over the years.

It's invested in an 100% equities fund, and will be until I reach my mid 50s. I don't intend or expect to retire before my mid 60s.

Alexland

On starting employment I regret being slow to complete the pension enrollment paperwork and missing the first month of circa £200 employer pension contributions which would now be worth circa £400.

I also could have phased my pension contributions better and put less in (only enough to get maximum employer matching) when I was a basic rate taxpayer and more in as soon as I became a higher rate taxpayer. That cost me thousands of pounds in wasted tax.

Alex

JoeEngland

hugheskevi wrote: »

My key points would be:

• Keep plans flexible - things will change many times
• Invest in yourself - the returns are immense, constantly aim to improve salary/income position until at least age 30, probably more like 35-40.
• Take risk - not just in investment, but also in life. Make sure you can deal with consequences, but in general seize opportunities.
• Take value - if govt. gives money away, take it, take all employer pension contributions, if higher rate taxpayer take the benefit, etc. This applies to all things, not just pension.
• Buy own dwelling as soon as stable in life, will be much cheaper than renting
• Avoid interest-bearing debt aside from mortgage, and buy everything outright unless incentivised to do otherwise
• Keep firm grip on expenditure, and don't let it drift upwards as income increases
• Ensure you understand all regular expenses, and that every one is optimised whenever contract (or similar) is due for renewal.
• Remember that early retirement is not the only goal in life - enjoy things as opportunities arise, eg, travel, but ensure you are getting value. Be flexible and able to benefit from the best opportunities, but never wasteful.
• Don't waste money on going out - spending £25+ on a meal and £30+ on drink is just a waste, especially as more often than not the end outcome is a reduction in health, particularly with alcohol. Do something more productive with time and money, eg go running with a club to socialise.
• Don't let money 'leak' away on a string of small but pointless purchases. Things like take-out coffee, purchasing lunch, etc.
• Stay fit and healthy so as to maximise time to enjoy early retirement
• Take advantage of anything free/subsidised. Running is (largely) free and may save on the expense of a gym, for example. Similarly swimming can be very cheap due to Local Authority subsidies.
• Learn in detail about tax. Understanding it is the first step to avoiding it.

Agree with some of these, but not all. Can't see why anyone would not want to eat or drink out sometimes as part of a social life or enjoying a change from eating at home. Also, why wouldn't you increase expenditure when income increases? I wouldn't want my spending power artificially constrained now by what I started earning 30 yrs ago.

hugheskevi

Can't see why anyone would not want to eat or drink out sometimes as part of a social life or enjoying a change from eating at home.

Eating and drinking out, especially in London, can be a very easy way to spend many tens or even hundreds of pounds. I see quite a few of the younger folk where I work thinking nothing of regularly spending over a hundred pounds on a routine night in the pub, food and a taxi home on a regular basis.

Each to their own, but I think there are much more productive and less expensive ways to pass time. Fine as a special (and hence rare) occasion, but avoid it becoming a very regular occurrence.

why wouldn't you increase expenditure when income increases? I wouldn't want my spending power artificially constrained now by what I started earning 30 yrs ago.

It is more about getting out of the habit of spending all (or most of) income, which a lot of people do. Early retirement is a simple function of saving, so more saving is done, the faster earlier retirement arrives.

It is a very similar principle to putting all higher rate tax income into a pension (if earning an appropriate salary). If people can accept living on an income equal to higher rate tax threshold, they will be in a better position to optimise their tax position.

Expenditure probably will increase as income rises, but it shouldn't be a straightforward 1:1 relationship as it is for many.

More generally, I think it important to get into good habits early in life to achieve early financial independence. That isn't about being totally frugal and living by strict rules, but more about avoiding getting into expensive habits and ensuring that all expenditure is well-considered and gives maximum satisfaction.

As an example, I've spent several holidays just driving and camping in the UK, but also spent several years traveling across Africa and Asia in the past - overall that was about getting maximum value out of great trips when the opportunity arose and just being basic when nothing especially attractive was available. The big trips set back full financial independence by several years, but were nonetheless well worth it.

snowqueen555

HarryGray wrote: »

Hi all,

I thought I'd start a thread for those who are already planning retirement (early or normal) at a young age.

What steps are you taking? What is your target and how are you going to achieve it?

Any inspiration welcome!

Just started my first proper full time job at 25 several years ago, just contributing since then. Wish I had put in more as despite maxing out employee contributions, I am not on a high salary.

Bimbly

I was very keen to start my pension as soon as possible, but with university and post grad study it wasn't until age 23 that I was able to do so. Back then, you couldn't just go on the internet and start your own pension, you had to go through an advisor (if there was another way, I was unaware of it).

I wanted to put in £200 per month, but the IFA refused. At my age, he said, I should put in £40 a month and look at this lovely chart of what my pension will be worth at retirement. Despite my insistence, he continued to refuse and so I reluctantly agreed, thinking I could always increase payments later. I tried to do this after a year and rang the pension provider, but they refused to accept an increased contribution without going through my financial adviser. It was very frustrating. Why was I not allowed to invest more in my own future?

The advisor never even considered that, as a woman, I might decide to take a career break to have children or anything like that, as he had a pretty chart which promised gold at the end of the rainbow. As it happened, no children came along, but I had some blips along the way. At one point I threw in the towel all and went travelling for a year, so I stopped contributions for a while.

Fast forward to age 35 and I join a company with a final salary pension scheme that allows transfers in. I transfer in my private pension and it buys me two extra years of FS scheme. So that's as if I started paying in at age 33.

So despite all my plans to get the pension going at a (relatively to my peers) early age and invest substancial amounts, I was 10 years behind.

The company, however, offered AVCs. I asked for information about these. Nothing happened and I kind of forgot about it for a bit. I asked for information again and still nothing turned up. In the meantime, I had been informally emailing the head of pensions as she had almost the same name as me with one letter different and I'd occasionally got her post or invites to meetings that were meant for her. It turned out when I asked for AVC information, it was sent to her because it was about pensions. Well, she knew all about AVCs, so she just ignored it. Until it clicked and she asked if the leaflet was meant for me.

I never got to put money into AVCs because along came another blip (put into bad position by poor work management, long story) and I had to go part time. I didn't have any extra money any more and if the AVC leaflet did arrive, I couldn't do anythjng about it.

I'm now trying to catch up with putting extra into a DC scheme. All this, despite being very insistent on investing a lot into a pension at the earliest opportunity.

If there had been the internet back then, things would have been different. Although I realise I have had other advtanges in the times I've lived through like being able to buy a house and having at least some of my pension in a FS and career average benefit scheme.

/end rant

zagfles

When I was 25 I did save, but only a little into a pension, mostly cash, PEPs, ISA etc. Pensions were too inflexible then, with high charges mostly hidden under the radar and financial sales staff/advisers motivated by commission.

It worked out quite well - the savings enabled me to up my pension contributions when they were far more efficient like when I was a 40% taxpayer, when I had kids and was claiming tax credits, child benefit etc. With the benefit of hindsight I'd probably do exactly the same again But it was mostly luck that all the tinkering with the rules over the years suited my saving methods.

The important thing is to save - not necessarily in a pension, and not necessarily for retirement - but any form of saving is likely to help your retirement plans. For instance saving for a house deposit means lower mortgage, meaning ability to pay more into a pension later in life or pay off the mortgage earlier.