How am i doing...

thickasabrick

I'm using the "The Millionaire next door" formula as an easy to understand target.
Target net worth = (Age – 27) x Annual pre-tax income / 5

Using the figure from this Which article "How much will you need to retire?"
£215,450 How much you need in your pension to get £27,000 a year from income drawdown at normal retirement age.
Increase the pot amount if aiming for earlier at 55 as opposed to 67 as you will be missing the state pension amount used in the Which article.

Use a "Savings Goal Calculator" and adjust the figures to see if you'll hit the figure in the timescale you want at a savings rate you can sustain.

Bit of background reading from one of my favourite bloggers for a bit of "inspiration".
"Financial independence is for everyone"

SB1980 wrote: »

First post here, and after much googling I can't find a comparator / guide online anywhere. Not sure if a tread already exists on this, so apologies if it does. Just really wanted to know how I am doing in relation to pension pot etc.


I am 38, work full time, 20 years left on mortgage and plan to take 5 years off that when remortgage next year. I am in Company pension scheme I contribute 10%, employer 6%, pot currently just over £90k. I've just opened a LISA to top up retirement planning, but only adding £100pcm at the min.


How do I compare? do I need to do more, nervously asking for advice/guidance/commets as to what else I should be doing, or if I am on track. Ideally I would like to retire before state pension age, so keen to do what I can now.


thanks in advance.

cloud_dog

SB1980 wrote: »

This all makes perfect sense, thank you!


To explain my thinking in the LISA, I don't feel I am going to be in a position to retire pre 60, and plan to gradually increase LISA contributions until age 50 (when I know I have to stop) the range of predictor calculators online suggest c£50K value at this point, which would prevent me from needing to access as much of my 25% tax free pension pot, and therefore reduce tax liability from pension drawdown... I could be totally wrong in this, as it's all pretty new to me, I've been a head in sand burier up to now.

Ok, this does confuse me a little

If you are expecting to not access these long-term retirement monies until 60 or after then why not use the pension as the vehicle for this? Financially, even with you being taxed they are by far the most efficient way of building your pot, and this includes any contributions you make within the BRT threshold using SS.

Re the 25% tax free, you've lost me. 25% is tax free so, why wouldn't you take it? whether you take it as a single lump sum or some variation of this within your draw down is up to you. I am assuming you will be drawing down as opposed to purchasing an annuity?

Assuming you retire before SPA I would suggest you withdraw as much as possible from the pension pot before you start receiving SP as (obviously) receipt of SP increases your income tax liability. There are pro's and con's to this depending on your finances / estate, leaving more in the pension will offer more inheritance tax benefits up to age 75.

I have a DB scheme but am building a DC pot for improved flexibility and using SS contributions I am chucking in as much as I can at the moment (plans to increase this). Once I retire I will draw down all of this pot as tax efficiently as possible (either taking the full 25% TFLS or via UFPLS). I'm much in advance of your years but I don't need to decide on the withdrawal option yet.

SB1980

cloud_dog wrote: »

Ok, this does confuse me a little

If you are expecting to not access these long-term retirement monies until 60 or after then why not use the pension as the vehicle for this? Financially, even with you being taxed they are by far the most efficient way of building your pot, and this includes any contributions you make within the BRT threshold using SS.

Re the 25% tax free, you've lost me. 25% is tax free so, why wouldn't you take it? whether you take it as a single lump sum or some variation of this within your draw down is up to you. I am assuming you will be drawing down as opposed to purchasing an annuity?

Assuming you retire before SPA I would suggest you withdraw as much as possible from the pension pot before you start receiving SP as (obviously) receipt of SP increases your income tax liability. There are pro's and con's to this depending on your finances / estate, leaving more in the pension will offer more inheritance tax benefits up to age 75.

I have a DB scheme but am building a DC pot for improved flexibility and using SS contributions I am chucking in as much as I can at the moment (plans to increase this). Once I retire I will draw down all of this pot as tax efficiently as possible (either taking the full 25% TFLS or via
I'm much in advance of your years but I don't need to decide on the withdrawal option yet.

thank you, again I can't argue with any of this, I've some thinking / planning to do

cloud_dog

The fact that you are thinking / planning now puts you in a very good position.

Take your time, consider, and don't get too frustrated with it all. There are lots of more knowledgeable posters on here than myself who can help.

atush

AnotherJoe wrote: »

Except most people don't save enough in pensions so that's not a great benchmark to go by.

Most people have less than a 3rd of that. And quick and dirty says 35K at 35. They are doing better, and saving 16% of income.

While they could do more, i maintain they arent doing badly.

atush

SB1980 wrote: »

I suppose I hadn't really thought of it that way, but makes sense. Thanks.

I do agree to concentrate on pension over mtg at this point (and at these interest rates)

barnstar2077

jeepjunkie wrote: »

For endless years we put most scraps of interest, cashback, unexpected cash, stoozing profits, quidco etc into a personal pension now a SIPP as you can easily swipe in your debit card for all these random amounts. Also used as a bucked to consolidate DC schemes where appropriate plus a monthly fixed DD amount.

Had we put that into the mort over the years or spent it on stuff we would have missed out on all that tax relief and growth.

We now have this SIPP bucket worth almost £100k in addition to various excellent work DB pensions. In the last three years alone value has gone up by almost 50%.

Perhaps later in life when you have amassed wealth you can dovetail the mortgage, if any, to your planned retirement age. It will give you options you have not even thought of yet

For many years everything I had extra went into overpaying the mortgage. I only had eight years left on there and a small balance. I extended the mortgage term last year, increasing it back up to twenty five years again. This dropped my monthly payments by two thirds, and I now pay the difference into my SIPP. I can always change this at a later date, or pay the mortgage off with my SIPP in sixteen years when it becomes available to me. This was an idea I got from reading these forums. It may not be for everyone, but it is working out for me so far.

crv1963

cns06 wrote: »

The first questions, IMHO, that you need to ask your self are:

What age do you want to retire?
What sort of income do you want?

I agree with all the other posts- the rule of 25 is a good rough target, not many save enough regardless and pension savings over mortgage given present interest rates.

OP you are doing well because you are taking a close look at it now but the bottom line is as cns06 states above. Sort out a rough plan of when you want to retire, how much income you want when you retire and work back from there.

Do you have a spouse/ partner? If so what are their aims/ views and thoughts? They may like Mrs CRV just want to know the bottom line of when can they retire, how much they will get and how much it will cost now? Or they may like you take a proactive interest.

Using different savings pots which have different rules offers you flexibility when the time comes. Using LISA and ISA can supplement income, replace income or facilitate going before the pensions come into payment depending what your target age is.

We decided to overpay mortgage in very simple terms by simply rounding up our payment to the next £100, so pay £700 pm instead of £692, a tiny amount but psychologically important to Mrs CRV we are overpaying, while we concentrate on for us the important work of building pension provision and savings.

So have a good read around the threads, decide your targets and plan accordingly, accept there will be rule changes and moving goal posts over the time between now and retiring and adjust accordingly.

Good luck I'm glad you're looking at it now rather then be a late entrant like myself and Mrs CRV.

rawhammered

SB1980 wrote: »

First post here, and after much googling I can't find a comparator / guide online anywhere. Not sure if a tread already exists on this, so apologies if it does. Just really wanted to know how I am doing in relation to pension pot etc.


I am 38, work full time, 20 years left on mortgage and plan to take 5 years off that when remortgage next year. I am in Company pension scheme I contribute 10%, employer 6%, pot currently just over £90k. I've just opened a LISA to top up retirement planning, but only adding £100pcm at the min.


How do I compare? do I need to do more, nervously asking for advice/guidance/commets as to what else I should be doing, or if I am on track. Ideally I would like to retire before state pension age, so keen to do what I can now.


thanks in advance.

Some bench-marking:
I turn 40 in 4 weeks (:eek:)
Intend to retire at 60 at very latest. £60k salary.
£250k DC pot (contributing 28% ee / 12% er)
10 years left on mortgage.

Wife is 40 already (:rotfl:) and works 3 days a week as a teacher.
2 kids (7 and 9)

Woby_Tide

Age 43
Not sure on retirement age but as soon after 55 as is feasible. Current salary £75k
Current DC pot £360k contributing for 18 years, rough calculations that it has been growing at 8.9% per year after fees on average. 12% Employer Cont, 6% Employee cont
Long time left on the mortgage thanks to a divorce but anticipate sacrificing that house at some point or clearing with lump sum