Advice at 30

[Deleted User]

ferox666 wrote: »

£6400? Do you mean £64,000? If yes, good compounding!

No, he means £6400. I did the exact same thing. Started career 24 years ago. Money was tight - we had a young family. Still contributed a small amount into Equitable Life pension, about 10% of which went into their with profit fund. With various payouts, It has done ok over the years (and another payout is coming shortly), but the total I have in the “with Profit Fund” is around 6k, far less than 1% of my total net worth and the total in Equitable Life is less than 5%.

Based on this specific example, it’s not worth putting too much of your limited funds into the pension early on because income grows dramatically and the early contributions become meaningless in the overall scheme of things. Still, things can always work out differently.

crv1963

ferox666 wrote: »

£6400? Do you mean £64,000? If yes, good compounding!

£6400, which in the scheme of things is small beer and a tiny fraction of our savings. Even in a scheme that went belly up, it is my only example of my experience of DC style savings but is better than a kick in the teeth- there are no doubt others here who have better examples. I just wanted to show to OP money grows in the background- I wrote off this money when they went belly up but it is still there and has grown.

Mrs CRV did the SERPS opt out, not sure how much she put in but it would have been a small percentage of her income, that fund paid into for a few years has grown over the last 30 years to around 100k.

Small sums saved into investments grows to decent sums over time. Mrs CRV lost track of her fund, moved, changed names and thought it only the 23000k from her previous 2004 statement so it pays- 1) to invest, 2) keep track of it and 3) let the companies know where you live!

Pip_Boy_111

I'm 33 and have been trying to figure out how much (roughly) i can reasonably expect from my pension at 60 (hopefully sooner).
Salary £38k. I pay 15% my employer pays 13.5%. Currently approx £42k in the pot. Have a pot of £32k with an ex employer that isn't paid into anymore.
All the calcs i have used seem to be based on annuities and i cannot fathom how to work this out based on drawdown in retirement. Or am I being simple? Is it really just projected pot size and then base it on 4% withdrawal per annum?
Once all my debts are gone i hope to save more towards retirement (possibly s+s isa. Pay the debts then cross that bridge :rotfl:)
So two fold reason for this post. OP asked for comparison. This is my state of play.
If anyone can shed light on figuring out some idea of the income this could provide at 60 then great. ( well aware all figures are estimates and depend on actual investment performance etc.)
Thanks all :beer:

[Deleted User]

“I pay 15% my employer pays 13.5%”... I would have thought that’s enough. As long as you invest wisely.

However your income at 60 is completely unpredictable. Anyone who says otherwise is talking BS. 30 years is a looong time and we can’t predict the future.

Focus on your family and work, continue contributing at the same rate, stop thinking about retirement and you’ll be good.

Anonymous101

Pip_Boy_111 wrote: »

I'm 33 and have been trying to figure out how much (roughly) i can reasonably expect from my pension at 60 (hopefully sooner).
Salary £38k. I pay 15% my employer pays 13.5%. Currently approx £42k in the pot. Have a pot of £32k with an ex employer that isn't paid into anymore.
All the calcs i have used seem to be based on annuities and i cannot fathom how to work this out based on drawdown in retirement. Or am I being simple? Is it really just projected pot size and then base it on 4% withdrawal per annum?
Once all my debts are gone i hope to save more towards retirement (possibly s+s isa. Pay the debts then cross that bridge :rotfl:)
So two fold reason for this post. OP asked for comparison. This is my state of play.
If anyone can shed light on figuring out some idea of the income this could provide at 60 then great. ( well aware all figures are estimates and depend on actual investment performance etc.)
Thanks all :beer:

Are you any good with excel? I set myself up a spreadsheet using future value formulas. It’s fairly simple to do and can give a good idea of what your pot will be worth at a given time.

As for how much income you’ll be able to drawdown. There’s a general rule of thumb the FI crowd use which is that 4% a year is able to be drawn down each year without your capital even being diminished.

You can also use that rule of thumb to get a guide to how large your pot needs to be by multiplying your annual expenditure by 25. So if you need £25k a year to live off you should be aiming for a pot of £625k. Obviously that doesn’t take into account things like state pension which you could factor in.

Spreadsheetman

Anonymous101 wrote: »

...
As for how much income you’ll be able to drawdown. There’s a general rule of thumb the FI crowd use which is that 4% a year is able to be drawn down each year without your capital even being diminished.
...

No, that's not correct. The "4% rule" is the amount that can be taken, adjusted for inflation each year, with the pot given a 95% probability of not reaching zero over a 30 year timeframe. (it is also based on USA-only 50:50 mix of equities and bonds)

A world investment mix is more like 3.5% and if you want it to last longer, have a higher probability of success or have capital preservation then you need to take less % still.

Anonymous101

Spreadsheetman wrote: »

No, that's not correct. The "4% rule" is the amount that can be taken, adjusted for inflation each year, with the pot given a 95% probability of not reaching zero over a 30 year timeframe. (it is also based on USA-only 50:50 mix of equities and bonds)

A world investment mix is more like 3.5% and if you want it to last longer, have a higher probability of success or have capital preservation then you need to take less % still.

I understand there’s a lot of debate about it. Personally I’d aim for 3.5% drawdown too. I was just trying to give a quick guide as far as what size a pot might be required.

Muhren

So for comparison I have just turned 36 and have approximately £74k over two pensions, I have recently upped my contribution to 36% with my employer paying 12%. I am single with no kids and realise that these levels of contributions may not be classed as the norm for someone of my age, but I am trying to make hay as the sun shines, as my circumstances may change if/when I meet someone.

I would like to achieve FIRE as quickly as possible, so I am also investing into LISA/ISA and shares at work. I don't feel like I miss out on anything, I just have to be sensible with my money, and try to find the best deals on everything (which I actually enjoy and don't find it a chore). I usually take my own lunch to work but every now and again we will go out as a group for lunch. I think as others have said, it is about balance. I have a budget each month that I try to stick to. Sometimes I am under, sometimes over, just depends on what is happening that particular month.

Pip_Boy_111

Anonymous101 wrote: »

Are you any good with excel? I set myself up a spreadsheet using future value formulas. It’s fairly simple to do and can give a good idea of what your pot will be worth at a given time.

As for how much income you’ll be able to drawdown. There’s a general rule of thumb the FI crowd use which is that 4% a year is able to be drawn down each year without your capital even being diminished.

You can also use that rule of thumb to get a guide to how large your pot needs to be by multiplying your annual expenditure by 25. So if you need £25k a year to live off you should be aiming for a pot of £625k. Obviously that doesn’t take into account things like state pension which you could factor in.

Thanks for this. As a general rule, what would be a fairly conservative figure to use for growth per annum, after inflation? I'm not obsessively trying to work this out to the penny, just trying to get a ballpark to aim for. Was looking at compound interest calculators but slight differences in percentage growth make huge differences to the final figure, so would prefer to be fairly pessimistic on possible investment performance to cover the bases. I've got a figure in my head of around £20k per annum as a minimum in retirement. Although this is just a rough guesstimate at this point. With 30 years to go i'm not going through my outgoings in detail as a LOT of things will change between now and then.
And I'm ok enough with excel to create budget spreadsheet but wouldn't know where to start with future value formulas :eek:

jonnygee2

I am trying to find out what the average 30 year old is paying into their pension at the moment., whether at £475 per month I am ahead of the game or not.

You are probably about average. It's okay. At 30 I had very little saved for my pension, probably less than 10k. I'm not mid 30s and contributing more. I used pay rises to increase the percentages so that I didn't feel it as much. Now I'm at 10%, employer 10%, which is more than enough by almost any projection. I don't anticipate spending a lot in retirement - I don't actually spend a lot now!

One thing to bear in mind is that you've asked in the wrong place for comparisons. Here you'll find people who think about pensions and savings a lot (probably too much!), the average 30 year probably hasn't given her/his pension a thought in years.

Many people don't start thinking about it until they are in their 40s but still end up alright.