Is my pension pot on track?

Prism

One of the unknown factors in all of this that makes predicting pot size difficult is inflation. So if for example there is an average 3% inflation over the next 29 years then that £30000 a year will need to be £71500 a year.

Another unknown which you have some control of is the future growth of your funds. Typically the higher equity to bond/cash percentage you have the likely chance of better growth - however that is also far from predictable

Save what you can, and review every so often.

JoeCrystal

Assuming a straightforward return of 13.46% from 33 with £15,100 become £588,500 by 62 in pure cash term.

35 = £19,439
40 = £36,550
45 = £68,722
50 = £129,212
55 = £242,951
60 = £456,807
62 = £588,500

However, taking inflation into account of 2% over the course, £588,500 would only be worth £331,140 in today's money. I believe you would need a pot worth £1,044,293 in order to supply £38,180 (which is £21,500 in today's term)

35 = £20,225
40 = £41,986
45 = £87,163
50 = £180,950
55 = £375,654
60 = £779,862
62 = £1,044,503

I hope this makes sense? Future inflation and return are really the biggest unknown factors, unfortunately.

planteria

Prism wrote: »

..if for example there is an average 3% inflation over the next 29 years then that £30000 a year will need to be £71500 a year.

that makes the task ahead for the OP, and many of us, challenging. it's easy to be pleased with investment growth, but the truth is we all need significant growth to even keep pace with inflation.

Thrugelmir

Prism wrote: »

Another unknown which you have some control of is the future growth of your funds. Typically the higher equity to bond/cash percentage you have the likely chance of better growth - however that is also far from predictable

Depends on the yield available from bonds. Investors are currently forced into taking a higher degree of risk due to the very low yields on Government bonds and blue chip corporate bonds. Only time will tell if this was a sensible approach and the risk worth taking.

AnotherJoe

JoeCrystal wrote: »

I agreed. It is nice to overpay the mortgage as having the mortgage paid off can have a sense of relief but nothing stopping you from doing both. But in this case, having pension contribution invested this early would be more effective than overpaying the mortgage especially with such a high goal in your case. Focus on pension contribution and only if you can afford it and take into account the rest of your financial situation, overpay the mortgage.

Especially as, the mortgage will take care of itself without overpayment. A pension will not.

A mortgage doesn't get income tax relief. A pension does.

The mortgage debt is being whittled away by inflation. The pension in a way is the reverse, in that earlier money is worth more than later money. So, pay £1 into your pension now instead of £2 in 30 years time, and delay paying £1 off the mortgage now because in 30 years time you can pay 50p.

Thrugelmir

AnotherJoe wrote: »

The mortgage debt is being whittled away by inflation.

If you are working in the public sector (for example). Then pay rises have been generally below the rate of inflation. The debt may still feel like a huge burden. The option to save more into pensions may not be available either.

If moving house is a future consideration. Then building equity should never be discounted either.

harshitguptaiitr

AnotherJoe wrote: »

The mortgage debt is being whittled away by inflation. The pension in a way is the reverse, in that earlier money is worth more than later money. So, pay £1 into your pension now instead of £2 in 30 years time, and delay paying £1 off the mortgage now because in 30 years time you can pay 50p.

I knew I read this commentary somewhere on MSE forum and spent last 5 minutes searching for it. This paragraph is something that MSE team should seriously look at and consider running a guide on: Net Present Value (NPV) or alternatively Future Value (FV).

Zola.

OP this may be of some use:

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/