How much do we need to save for retirement?

Geworgie

Hello!
We are currently paying of a fairly sizeable chunk of debt but I'm trying to think further ahead.

I have no idea where to even start with pension planning. I'd love to be able to retire at 60ish but I don't think that's realistic for us! :rotfl:

Can anyone point me in the right direction please?

bob_a_builder

https://www.crystal-balls.co.uk/

Mick70

all depends on circumstances /debt/ family/ lifestyle/health etc etc
a recent programme on pensions which was discussed on here , made out £500k for a couple would be minimum (or £17k pa)

Bravepants

Time to deploy my ever evolving set of beginner bullet points based upon my own experience and non-expert findings (comments/adjustments always welcome)...

Start with bullet point number 1 and then choose other bullets as appropriate, or consider them in order:

• Pay off any non-mortgage debt first, then

• Start with 3, 6 or 12 months outgoings (maybe even swap the word "outgoings" for "salary") as an emergency fund in some sort of (or several) instant access account. Find out about current accounts, regular savers etc. and the interest rates they provide. With all savings and investments use the principle of "pay yourself first", that is, put money aside when you get paid, not at the end of the month saving what's left over - because there probably won't be!

• Make sure you have any cash needed for expenditure in the short term, such as house purchase deposit, replacement car, wedding (don't overspend on this) etc., and

• Figure out how your work pension works, and how much extra your company contributes for any additional contribution you make, pensions (work, private or SIPPS) are particularly good if you are a higher rate tax payer. On the subject of pensions…

• Be very aware of pension transfer scams! Even the ones that mention bone fide financial companies. Anyone promising you "guaranteed" returns is likely a scam artist, especially if the returns they are promising are double figure percentages, i.e. 10% or more! Remember you cannot, and nor can anyone on your behalf, legally take money out of a pension before pension age!

• Buy or borrow a copy of Tim Hale's "Smarter Investing", and once you have point 2 and point 3 in place:

• Check out www.monevator.com, particularly the passive investing section, and,

• Read up about the tax advantages of Stocks and Shares ISAs and SIPPS, and

• If considering retiring early check out www.mrmoneymustache.com and https://theescapeartist.me for inspiration, then

• Stash as much as you can, monthly (taking advantage of "pound cost averaging"), in a global index tracking fund , or a multi-asset index fund (or fund of funds - read up online about these). As you get older switch to funds that contain a lower percentage of equities and higher percentage of bonds (read up online about these, but Tim Hale talks about it too) depending on your tolerance for risk. Keep it simple and stick to one or two funds until you have £100k or so.

• Whatever fund(s) you plan to invest in make sure you don't pay too much in annual fees; a good passive index fund should be around 0.5% or so, including platform charge, active funds (those managed by humans) are around 1% to 1.5% but try to keep close to 1%. In no way pay 2% in annual fees for any of your investments!

• If having considered the above you are unsure about making your own investment decisions then seek the advice of an IFA (Independent Financial Advisor) - the word "Independent" is very important here, avoid Financial Advisors who want to sell you a product owned by the company for whom they work!

• Learn about the concept of a "phased" retirement, using certain pots of money to carry you through periods before work pensions or SIPPS become payable at Normal Retirement Age (often referred to as "bridging the gap") and/or think about actuarial reduction if appropriate.

• Learn to use Microsoft Excel (other spreadsheet software is available) and write yourself a retirement planning spreadsheet, and finally…

MaxiRobriguez

This question is entirely dependent on when you want to retire and what your outgoings will be.

At 60, you probably need to factor in 35-40 years worth of living, and for that you would probably want a DC pot of £400k minimum if you were wanting £20k a year, considering you won't get state pension for at least 8 years after retirement.

If it helps, I'm 32 and I'm targeting having £650k by 60, which is going to require me to put in £1,500 a month for the next 28 years.

People under 50 underestimate how much is required if they want the same lifestyle as current pensioners are having. DC is much less generous, so the onus is on you to make up the difference.

LHW99

Worth looking at how much you would need to live on after the debt is gone, and you have no work-related expenses.

chubsta

LHW99 wrote: »

Worth looking at how much you would need to live on after the debt is gone, and you have no work-related expenses.

That is what I have done - I am looking at a £26000 per year pension, which leaves plenty of spare money considering I won't be paying mortgage, work travel costs, national insurance, pension contributions etc, so even though the pension is a fair but less than my wages in real terms I will actually be better off

Dazed_and_confused

Full State Pension for two will get you to £18k so you just have the remaining 30% to save for.

Check your State Pension forecast carefully on gov.uk. Ignore the headline figure and read to what you have actually accrued to date and how many years (if any) you need to accrue to get to £168.60/week.

NB. The "35 year" rule does not apply to you.

tony4147

MaxiRobriguez wrote: »

At 60, you probably need to factor in 35-40 years worth of living, and for that you would probably want a DC pot of £400k minimum if you were wanting £20k a year, considering you won't get state pension for at least 8 years after retirement.

I think £400K is an under estimation, £500K may get you there.

couriervanman

Mick70 wrote: »

all depends on circumstances /debt/ family/ lifestyle/health etc etc
a recent programme on pensions which was discussed on here , made out £500k for a couple would be minimum (or £17k pa)

i think people forget about the interest on pension pot....500k would still be worth about 429k after 10 years assuming 2.5% interest ......so nowhere near 500k needed

MallyGirl

pensions don't earn interest - they are generally invested. Growth might be 2.5% above inflation, but might not.