Advice at 30

Pip_Boy_111

MEM62 wrote: »

Based on your age and current contribution levels, that will give you an income of around £21,000 per annum in today's money. That's not going to provide much of a retirement.

Accepted wisdom is that you work out what kind of retirement you want and what level of income you will need to support it. You can then work that back to see at what you need to be contributing to your pension pot.

Play with this. It's a useful tool.

https://www.aviva.co.uk/retirement/tools/my-retirement-planner/

Thanks for this link. have had a play with it and unless the growth is -0.5% (bad times?) things look good. Seems like i SHOULD surpass my minimum of £20k per annum all being well. Mind now at rest. All on track. Back to ridding myself of debt and mortgage to make this happen :money:
In other words, forget about 60 year old me and enjoy being 33 year old me :T

JoeCrystal

You already made a great decision in that you are taking a serious look at your retirement provision.

First of all, I agreed that your pension pot is, in fact, measly at your age and especially at your salary but you are already doing better than the median household. In 2016 ONS survey, the median household current occupational defined contribution pensions are £7k while personal pensions are £26k. The median household total pension wealth of those who do have pension schemes is 115k.

But since you ask what an average 30 years old would have, there is a 2016 ONS survey covering individual private pension in 2014 to 2016. I have to admit it is out of date but, the median pension pot for those aged between 29 to 34 is £17,000. So you are not doing poorly compared to your peers but as you can see, clearly not sufficient.

In my case, I am 34 years old, and I initially set up a personal pension with an IFA back in 2011 and got auto-enrolled in the work pension scheme a few years later. I considered that it is my most sensible decision in my life to open that pension scheme and overall, managed to have a pot worth £71k by now. I generally contribute 25% of my basic pay / £577 per month into my pension pots. My employer, on the other hand, is contributing the minimum thus not that helpful

My long term goal is once my salary reaches £28,800, I will increase the contributions evenly to maintain a 25% contribution to the basic pay. I won't deny that it has been easy to do so, especially I am trying to meet other commitments as well so gradually seeing a decline in my liquid cash over time. But I am very committed to making sure that I will have a comfortable retirement regardless of the cost. As it stands, once the mortgage is paid off and the pension contributions ended, my full state pension is sufficient to cover all priority bills, foods with few hundred pounds to spare but I want to be able to retire when I want to and not until 68 (or later if we are unlucky). Some days I do wonder the point of contributing so much.

cns06

You are an accountant. Stop looking at the % and look at the £ instead.

If I were you I would consider your required income in retirement and work back.

Given your current income and your occupation lets say as a pie in the sky example £40k PA in retirement. We all know this needs a pot of roughly £1m.

So to get there in lets say 30 years with 4% growth you need to add about £16-£18k a year to your pot, via a combination of your own contributions, employer cont and tax relief. If you deferred starting that process for lets say 5 more years you are going to need to add more like £24k a year, over 25 years.

As you can see time in the market is the biggest factor here.

There are of course lots of other factors, state pension, increase in your PAYE as your job progresses, inheritance, personal circs such as children etc etc etc.

snowqueen555

JoeCrystal wrote: »

You already made a great decision in that you are taking a serious look at your retirement provision.

First of all, I agreed that your pension pot is, in fact, measly at your age and especially at your salary but you are already doing better than the median household. In 2016 ONS survey, the median household current occupational defined contribution pensions are £7k while personal pensions are £26k. The median household total pension wealth of those who do have pension schemes is 115k.

But since you ask what an average 30 years old would have, there is a 2016 ONS survey covering individual private pension in 2014 to 2016. I have to admit it is out of date but, the median pension pot for those aged between 29 to 34 is £17,000. So you are not doing poorly compared to your peers but as you can see, clearly not sufficient.

In my case, I am 34 years old, and I initially set up a personal pension with an IFA back in 2011 and got auto-enrolled in the work pension scheme a few years later. I considered that it is my most sensible decision in my life to open that pension scheme and overall, managed to have a pot worth £71k by now. I generally contribute 25% of my basic pay / £577 per month into my pension pots. My employer, on the other hand, is contributing the minimum thus not that helpful

My long term goal is once my salary reaches £28,800, I will increase the contributions evenly to maintain a 25% contribution to the basic pay. I won't deny that it has been easy to do so, especially I am trying to meet other commitments as well so gradually seeing a decline in my liquid cash over time. But I am very committed to making sure that I will have a comfortable retirement regardless of the cost. As it stands, once the mortgage is paid off and the pension contributions ended, my full state pension is sufficient to cover all priority bills, foods with few hundred pounds to spare but I want to be able to retire when I want to and not until 68 (or later if we are unlucky). Some days I do wonder the point of contributing so much.

That's quite a high contribution, may I ask how percent you dedicate to normal savings? do you have a mortgage etc?

Anonymous101

Pip_Boy_111 wrote: »

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 valued formulas :eek:

I’ve tracked my spending and I know from the last 2-3 years that I’d need £30k+ to maintain my current lifestyle. I can’t really see that increasing too much in any circumstance though so happy to base my saving on that requirement.
Future value formulas sound much more complicated than they are. If you can work a budget you should be ok with one. Have a google and see if you are. I’m happy to share mine if you’re struggling. Drop me a pm and I’ll email you the one I use. :cool:

jonnygee2

My long term goal is once my salary reaches £28,800, I will increase the contributions evenly to maintain a 25% contribution to the basic pay. I won't deny that it has been easy to do so, especially I am trying to meet other commitments as well so gradually seeing a decline in my liquid cash over time.

Your contribution level doesn't make sense to me. After that, you are surely taking home under £1500 a month?

If you can live on £1500 a month now, with a mortgage, commuting costs etc you can probably live on it very comfortably in retirement. For that you will only need a retirement income of about £12,000 year on top of state pension. To achieve this, you'll need a pot of about £300,000. But you are on track for a much bigger pot than that.

There's surely no point saving so hard to end up richer in retirement than you are now? It'd be a real shame to punish yourself for the whole of your 30s and 40s, only to have a large retirement pot that you have no time to enjoy it.

cns06

Assuming he retires at 67 not 55 or earlier?

JoeCrystal

snowqueen555 wrote: »

That's quite a high contribution, may I ask how percent you dedicate to normal savings? do you have a mortgage etc?

Out of my take-home pay, I pay the following bills or savings.
Mortgage: 30% (which includes overpayment). 15% is the standard payment
Pension: 25%
Priority Bills: 18%
S&S ISA: 12%
Any remaining go towards foods, household items & funs.

jonnygee2 wrote: »

There's surely no point saving so hard to end up richer in retirement than you are now? It'd be a real shame to punish yourself for the whole of your 30s and 40s, only to have a large retirement pot that you have no time to enjoy it.

My goal is always to retire whenever the pension can be accessed at so 55 atm and ideally on £18,480 (2/3 of my salary) which is very ambitious. and I do not want to worry about money ever. I do have to agree with your assessment, now I think about it. Will have another think on it now we are in the new tax year.

Sea_Shell

JoeCrystal wrote: »

I do not want to worry about money ever.

The trouble is, even WITH money your worries just change, from "have i got enough" to "how are my investments doing, am i in the right funds?" ;)

k6chris

One useful habit to get into is to divert 50% of any pay rise straight into your pension - so a promotion that gave you a headline salary increase of say 10% would see you paying an extra 5% each month into your pension pot, an annualy payrise of 2% would add 1%. This soon adds up and help avoids the double whammy of lifestyle-creep too! If you earn commission or bonuses, think about diverting a one-off chunk of those too.


Good luck!