Advice On How To Proceed at 41. Have done zero preparation for retirement

CheekyMunkey

Hi Guys,

Im completely new to this all and I must admit I am having a bit of a panic. I have a bit of anxiety right now. Haven't really slept for a month or so its hitting me hard. Im going to turn 42 soon. I really havent done much financial planning for my life and my future so I guess Im freaking out big time. I am currently in the process of selling my flat which I wanted to try and sell earlier last year so I could buy a house. I had a sale fall through so Im in the process of doing this now. I am single, no kids etc.
Am I too late to prepare for my future now an retirement? Ive always been quite good at saving money but never reinvested it to generate myself income which is where I have failed bigtime. 5-10 years of savings with no real return.
So what can I do now? I am trying to keep my cash free as I want to try and buy a house after I sell this flat (which has mortgage). I also realise that if I buy this house a lot of the money will then be locked into a home with a mortgage etc.
My current situation is
90k liquid
90k Ill get back when my flat sells
I have a fulltime job and currently can save around 1.5k a month after my expenses/bills come out. Im in the 40% tax bracket. 
I live in London so property prices are quite high here which probably doesnt help.
Multiple pensions from different employers. Im trying to track down what I have in each pot but its not going to be much.
Thats pretty much it. I have an IGINDEX account and I was thinking about putting some money into a stocks and shares ISA. I believe its 20k a year. I also saw that there are various ETFS but not sure which one to go for. Could I invest in a Vangaurd ETF and put it into my stocks and shares ISA with IG?
This is my own doing and Im mad at myself for putting myself in this position. Any advice would be really appreciated. Guess I have limited time now so what would be the fastet way for me to try and drive up my income to get to retirement sooner and gain some passive income. Can I adopt the FIRE method for people in my situation? Like an accelerated version.
I appreciate all your insights and knowledge. 
Thank
Cheeky.

NedS

Firstly, it's never too late and you are not at all alone in only starting to think about saving for your retirement now.

As you are a high rate tax payer, the most tax efficient thing you can do is to contribute extra into a pension to at least reduce your taxable income to void paying high rate tax (HRT). Do you have a works pension you are contributing to? If so, you could increase your contributions to that, or you could open a SIPP and contribute extra into that.

In terms of investments (either for a SIPP/pension or a S&S ISA), you could do a lot worse than a global equities tracker, either an ETF or fund such as those offered by vanguard.

CheekyMunkey

NedS said:

Firstly, it's never too late and you are not at all alone in only starting to think about saving for your retirement now.

As you are a high rate tax payer, the most tax efficient thing you can do is to contribute extra into a pension to at least reduce your taxable income to void paying high rate tax (HRT). Do you have a works pension you are contributing to? If so, you could increase your contributions to that, or you could open a SIPP and contribute extra into that.

In terms of investments (either for a SIPP/pension or a S&S ISA), you could do a lot worse than a global equities tracker, either an ETF or fund such as those offered by vanguard.

Hey Neds. Thanks for the info. Im basically trying to track down my pensions right now. I dont know much about my current pension but Im trying to get that information but I would imagine its probably very small in size as Ive only been at my current place for 2 years. Also, they set it up more as a government requirement more than anything else.

So I have a stocks and shares ISA. I havent really put anything into it. Im with IGINDEX. I was going to try and put in a bunch od stocks I felt would have future growth but like you metioned I think an ETF might be a better option. Less riskier. I think IG have some vanguard etfs but there are soo many. Guess I just want something thats more stable rather than those that are super aggressive. I thought the Vanguard life strategy would have been a good one but its not on IG. 

hugheskevi

I have a bit of anxiety right now. Haven't really slept for a month or so its hitting me hard. Im going to turn 42 soon. I really havent done much financial planning for my life and my future so I guess Im freaking out big time.

Very common, nothing to worry about. Most people suddenly realise at some point they have been neglecting an important, if not the most important, investment option. Many don't realise this until 50.

Am I too late to prepare for my future now an retirement?

Not at all. Your State Pension age is 68 so you have many years ahead. With planning, you can reduce that significantly.

So what can I do now?

Mundane things - 
(1) Start by working out what you have, document all your pensions, investments and assets including checking your State Pension. Make a speadsheet of all your assets at current value.
(2) Work out what you think you need in retirement, based on maintaining your current standard of living.
(3)  Work out most efficient way to achieve what you need

I am trying to keep my cash free as I want to try and buy a house after I sell this flat (which has mortgage). I also realise that if I buy this house a lot of the money will then be locked into a home with a mortgage etc.

Many make the mistake of over-prioritising mortgage overpayments. You have a range of objectives (buy house, reduce mortgage, save for retirement, etc) which requires a range of solutions. Just keep this in mind as you buy house and consider mortgage.

I have a fulltime job and currently can save around 1.5k a month after my expenses/bills come out. Im in the 40% tax bracket. 

Ensuring there is no wasted expenditure and using the additional savings generated from this to fund retirement has a doubly beneficial effect. Obviously, it increases retirement resources. But it also reduces the amount needed in retirement as you need less to maintain your existing standard of living following retirement.

I have an IGINDEX account and I was thinking about putting some money into a stocks and shares ISA. I believe its 20k a year. I also saw that there are various ETFS but not sure which one to go for. Could I invest in a Vangaurd ETF and put it into my stocks and shares ISA with IG?

Don't leap to solutions before you have ascertained what you are seeking to achieve. It sounds like you will be looking to balance the following going forward:

• Mortgage amount
• Monthly mortgage payment
• ISA contributions
• Pension contributions

Ensure you have a plan for the next 5 years or so that covers all of these and anything else relevant. Make sure you understand why you are contributing to what you are contributing to, and why you are not directing the funds to one of the other options.

Guess I have limited time now so what would be the fastest way for me to try and drive up my income to get to retirement sooner and gain some passive income. Can I adopt the FIRE method for people in my situation? Like an accelerated version.

Reducing expenditure and investing all saved income is the fastest way, although whether that is optimal is a wider question.

Ensuring you take full advantage of employer matching to pension is first step. Second is likely to be seeing if your employer offers salary sacrifice into a pension. Third is likely to be ensuring you avoid higher rate tax through pension contributions (be it salary sacrifice or otherwise). Make sure you understand your employer's pension offer and the way in which your contributions are made by researching the scheme fully (scheme literature, etc). Unlike personal investments, you are stuck with this arrangement whether you like it or not, so it is important to fully understand it.

The hard part will be deciding how much - if any - capital you want following house purchase and how you will use that. You could put it all toward house to lower mortgage, you could keep some back to maximise use of ISA in 2020/21 and 2021/22, or keep it all back, etc. 

Remember that the end of 2020/21 is coming up, so you only have a few weeks to use ISA and pension allowances.

 I think an ETF might be a better option. Less riskier. I think IG have some vanguard etfs but there are soo many. Guess I just want something thats more stable rather than those that are super aggressive. I thought the Vanguard life strategy would have been a good one but its not on IG. 

ETFs can be have as much investment risk as you want, including gearing, so that is not a valid reason. Multi-asset funds, etf trackers, etc, are all possible choices.

You can go with whatever provider best fits need, so don't obsess about IG. Sort out the plan first, then choose investments and provider to execute the plan.

Albermarle

As said , after leaving it this long , then no need to change course and go in head first.
The next few weeks will be better employed gathering info about your pensions , learning more about investments etc but not actually doing anything .

chelseablue

Never too late. 
I'll use my brother in law as an example; he's 48, self employed, never paid into a pension in his whole working life, never owned a property. Has zero savings 
He takes home almost £3,000 a month so not exactly hard up 
So, you a doing WAY better than he is

CheekyMunkey

hugheskevi said:

You can go with whatever provider best fits need, so don't obsess about IG. Sort out the plan first, then choose investments and provider to execute the plan.

Just wanted to say thank you for this and taking the time to lay it out like this. You are right. I need to understand what I want to do and what will impact my progress rather than diving right in. Getting a house is probably not the best thing to do but its something Ive been trying to buy for soo long. Lets see how it goes. The markets also hot right now. I can always move home with the folks temporarily. So I do have options. Again, thank you soo much

Albermarle

This is quite a good site to read regularly https://monevator.com/investing-for-beginners-why-do-we-invest/
This book is often recommended https://www.amazon.co.uk/DIY-Simple-Investing-Guide-Effective-ebook/dp/B00YPF6RCQ
These youtube videos are good https://www.youtube.com/channel/UC9OIwUcx-Uss7xj7s1P5XGw
Plus of course you can learn a lot from reading this forum !

xylophone

Is your current workplace pension with Nest/People's Pension/Now/one of the big insurers?

Make a list of all former employers. A pension scheme may or may not have been offered but you don't want to miss out any possibility!

Were any of  the schemes Defined Benefit?

What does your State Pension Forecast show?
https://www.gov.uk/check-state-pension

CheekyMunkey

xylophone said:

Is your current workplace pension with Nest/People's Pension/Now/one of the big insurers?

Make a list of all former employers. A pension scheme may or may not have been offered but you don't want to miss out any possibility!

Were any of  the schemes Defined Benefit?

What does your State Pension Forecast show?

Hi Mate. So Im trying to check in on this now.
Got a list of my employees and got the pension pots for some. Just need to get the rest but its not looking big lol.
Ive worked out that my current pension is with Nest. The letter I got said I would contribute 5% and that they would contribute 3%. However, looking at the actual numbers having logged in it works out that I contributed 2.7% and they have contributed 2.1% so Im not sure whats going on or I may have messed up the calculation some home.
Not really sure what Defined Benefit is? Is that like a special arrangement in my contract where I get extra pension perks?
So Im going to check my state pension, but when I did speak to the lady who worked at the office who deals with tracing pensions she said I had nearly paid off all my state pension contributions so that must be pretty close to being complete. 

Marcon

CheekyMunkey said:

Am I too late to prepare for my future now an retirement? 

What's the alternative? Of course you aren't! You are way ahead of the huge numbers sleepwalking into retirement (and many years closer to it than you are) with no provision at all and no resources to put anything aside.

Once you've had a good night's sleep you'll feel better about it all, so try an early night tonight and see if that helps.