How much money is good to have at age 30?

itwasntme001

The amount needed is going to depend on what your future spending needs are (which are all but certain).  On top of that, you have no idea what investment returns will be on the capital you have invested and will invest over you working life.

With regards to the SWR, there is no such thing as a set % as a rule.  The only rules you should be using for SWR are that it is going to be higher the younger you retire and higher the lower future prospective returns will be.  Now coming up with a SWR is going to be very subjective and there are all sorts of studies suggesting this and that.  The problem is we do not know what the future will be like and the history used in the studies covered periods of time with lower interest rates (post 1980s), big boosts in productivity (post war era) and technological improvements, all of which were huge tailwinds for assets, both risky and riskless.  It remains to be seen what tailwinds there will be for financial asset returns in the future.  If you were retiring now at age 50, I would not use anything more than a 2% SWR.

Focus on your career and other ways to boost your income, invest what you have in suitable investments that do not take too much mental energy and just enjoy life.

Sailtheworld

bowlhead99 said:

Sailtheworld said:

Currently you've got £95k in the financial freedom fund so assuming 4% is a safe withdrawal rate you could currently fund £3,800 of annual spending.

If 4% on top of inflation is an achievable investment return over the long term, the £3800 of spending would more than quadruple to £16k over the next 37 years, and when added to state pension entitlement would see you bringing in about £25k in today's terms (depending of course how the investments run and what the government does with state pension entitlements.

Of course, if you retired 15 years earlier than that, the theoretical £16k from the pension pot would only be £9k and the 4% withdrawal rate could be precarious if it might need to last half a century instead of a more traditional 20-30 years or so. I do agree with Maxi above that it would be better to be more cautious if you are looking to get off the pot early and have perhaps a half century of sequence-of-returns risk.

But if you earn a decent amount of money, the fact that your current pension won't provide for your entire early retirement is not a major issue. You will have 20+ years to make further pension contributions and if you are able to do some of them at higher rate tax relief, the combination of that and a decent salary in finance should see you right.

I think a lot of people would be happy if their pension was 30k by 30 if they were going to carry on working for 35 more years; so if you are already close to 100k of retirement investments that age you are definitely doing the right sort of thing to be able to quit the rat race a decade earlier.  And a majority of 30 year olds don't have £100k of home equity so again that's on the right track.

Yes, you're right I'm understating the OPs prospects by some margin because of the decades of compounding ahead.

My rough & ready calculation of retirement income is to take today's pension value and multiply by 4% but I don't have 37 years to go.

MaxiRobriguez

rachlikeswinter said:

My god this thread worries the hell out of me.

I'm 33, only have about £8k in my pension(s), and around £35k in cash savings which is shortly going to be spent on a deposit for a (shared ownership) flat. That's it. Mildly concerned I'll be destitute (or still working) at 70 now 

Most people in our generation will be working until they are 70. That's an unfortunate reality of poor career prospects, expensive asset prices and no DB pension schemes. On the whole, our generation in terms of retirement will be split between those who inherit well and those who do not. Many 30 somethings will end up inheriting hundreds of thousands of pounds in their 50's and 60's, but most will not.

You can only play the cards you hold. If you can save more, do it. If you can invest more, do it. If you can upskill/change jobs to earn more and it's something you want to do, then do it. If you're already doing the most you possibly can, then there's no point worrying about others in your peer group and what they are doing, because whatever it is they do/suggest - you can't do it, so why worry about it?

Sailtheworld

rachlikeswinter said:

My god this thread worries the hell out of me.

I'm 33, only have about £8k in my pension(s), and around £35k in cash savings which is shortly going to be spent on a deposit for a (shared ownership) flat. That's it. Mildly concerned I'll be destitute (or still working) at 70 now 

The later you start the more you'll have to rely on a high savings rate to do the heavy lifting.

If there's nothing you can do then just stay fit and ready yourself for the next 37 years of work. The reality is there's probably plenty you can do to improve your retirement income or date. 

Forever young people have suggested theirs will be the generation that is less well off than the one before and it never happens. Boomers were saying it when they were kids, I was saying it as a Gen X when I was part of Maggie's Millions - your kids will be saying it too.

MaxiRobriguez

Sailtheworld said:

rachlikeswinter said:

My god this thread worries the hell out of me.

I'm 33, only have about £8k in my pension(s), and around £35k in cash savings which is shortly going to be spent on a deposit for a (shared ownership) flat. That's it. Mildly concerned I'll be destitute (or still working) at 70 now 

Forever young people have suggested theirs will be the generation that is less well off than the one before and it never happens. Boomers were saying it when they were kids, I was saying it as a Gen X when I was part of Maggie's Millions - your kids will be saying it too.

Difference is data backs up this generations claims:

https://www.businessinsider.com/millennials-uk-first-generation-1800s-do-worse-than-parents-resolution-foundation-2017-2?r=US&IR=T

itwasntme001

My parents (in their 60s) never went to university or had particularly high pay jobs.  Yet they have built up a wealth of a few million.  Whilst much of this is working continuously for decades and being careful with money and thus having a high savings rate, it still would never have been possible without asset price inflation, wage inflation in the early years, disinflation in consumer prices in the later years and a high rate of interest in both nominal and real terms in order for compounding to do its magic.  In addition, the baby boomer generation had lucrative DB pension and GAR annuities to look forward to on retirement.  My Dad personally has a very juicy GAR currently in place.  Finally, there are risks that in the future a State Pension will be means tested.  It is unlikely to happen for much of my parents retirement, but for our generation it could happen.

Millennials with just the average degree today would likely find it very hard to accumulate as much wealth.

The huge economic benefits seem to have been front loaded to the baby generation, rightly or wrongly.

MaxiRobriguez

itwasntme001 said:

My parents (in their 60s) never went to university or had particularly high pay jobs.  Yet they have built up a wealth of a few million.  Whilst much of this is working continuously for decades and being careful with money and thus having a high savings rate, it still would never have been possible without asset price inflation, wage inflation in the early years, disinflation in consumer prices in the later years and a high rate of interest in both nominal and real terms in order for compounding to do its magic.  In addition, the baby boomer generation had lucrative DB pension and GAR annuities to look forward to on retirement.  My Dad personally has a very juicy GAR currently in place.  Finally, there are risks that in the future a State Pension will be means tested.  It is unlikely to happen for much of my parents retirement, but for our generation it could happen.

Millennials with just the average degree today would likely find it very hard to accumulate as much wealth.

The huge economic benefits seem to have been front loaded to the baby generation, rightly or wrongly.

The retort often given is "yes but we had 13% mortgage interest rates and millennials can get them for 2%"

Like it balances it all out. 

 

itwasntme001

MaxiRobriguez said:

itwasntme001 said:

My parents (in their 60s) never went to university or had particularly high pay jobs.  Yet they have built up a wealth of a few million.  Whilst much of this is working continuously for decades and being careful with money and thus having a high savings rate, it still would never have been possible without asset price inflation, wage inflation in the early years, disinflation in consumer prices in the later years and a high rate of interest in both nominal and real terms in order for compounding to do its magic.  In addition, the baby boomer generation had lucrative DB pension and GAR annuities to look forward to on retirement.  My Dad personally has a very juicy GAR currently in place.  Finally, there are risks that in the future a State Pension will be means tested.  It is unlikely to happen for much of my parents retirement, but for our generation it could happen.

Millennials with just the average degree today would likely find it very hard to accumulate as much wealth.

The huge economic benefits seem to have been front loaded to the baby generation, rightly or wrongly.

The retort often given is "yes but we had 13% mortgage interest rates and millennials can get them for 2%"

Like it balances it all out. 

 

Perhaps conveniently, they seem to miss out the high rates of mortgage interest occurred for a relatively brief period and wage inflation later on helped to more than take care of the preceding higher mortgage cost years.

We also need to consider that there has been a huge shift in the type of jobs in the UK today compared to even just 20 years ago and even more so 40 years ago.  A lot less good production and tangible output.  A lot more corporate style BS box ticking jobs with no tangible output.  It is no wonder more want to retire early with the advent of the FIRE movement.

1813

Well this is my situation at 38 ....
I have a db pension of around 4000 a year from my civil service job and 18 years State Pension. I have a small NHS pension of around £500 a year from the NHS as well, where I currently work as a bank worker, so I have no clue where this would really leave me at 68. Since I can take CS pension at 68 may invest that income into a pot and use that to build a pot and I am toying wiith the idea of investing now, too. 
I'd appreciate any feedback on my situation.
I look at sites on the net and they say I may need around £18-19k by the time I get to 68 based on inflation and things that are affected by it, whether that is accurate is another matter.

resk

MaxiRobriguez said:

Too many FIRE folk are going to get burned by this. It's all based on equity markets predictably gaining 6-7% every year.

The concept is fine, but the targets need to be more conservative. x30-35 / 2-3% withdrawal.

This bothers me too.  IIRC in the Trinity study, cases where 4% was drawn down every year, then after 30 years there was any money left, were treated as successes, with an overall success of close to 100%.  Fine, makes sense, but for some reason this has been commonly interpreted as "you can draw down 4% of your pot and your money will almost certainly never run out", which is quite different.  Someone retiring at 50 nowadays could live for 40-50 more years, easy.  

That said I would probably take the gamble at 3%, I really don't like my job though....