On track to retire at 50? Pension diary

Simon11

Hello all,

After moving into our new family home and having our first child soon, I have spent some time looking at pensions to ensure they are on track.

I spend a lot of time supporting charities and would really love having the option to retire at 50 to focus more of my time supporting them. I would estimate that with my partner (who may retire around 55), we would need £30k to live comfortably.

I think I am on track, however I would appreciate hearing your views in case I am missing anything! 

Current pensions at age 33:

* Defined contribution pension: £60k pot with investing a total of 17% of salary into this pot (employee/ employer)
* Defined contribution pension: £18.6k [foreign pension]

* Defined benefit pension: £800 annually

* State pension: Expenditure of £1k to fill two years, would give me 35 years of NI credits by 50
* B2L: Currently worth £180k and should increase due to major infrastructure being built close by. Expect to have tiny mortgage by 50. I am aware of capital gains tax however if I sell once I stop working, this will minimise my tax.

Partner (33)
* Defined benefit pension: Government pension
* State pension by 55

Only major debit is the mortgage which is around £570k, however if we keep plugging away at this (where tax beneficial), this should be close to zero by using some of the tax free lump from the pension.

I know that I haven't really considered the major financial aspects of having kids and supporting them at university/ purchasing their first house...

Thanks!

Dazed_and_C0nfused

State pension: Expenditure of £1k to fill two years, would give me 35 years of NI credits by 50

Although relatively young you are still under the transitional rules for the new State Pension so having 35 years isn't really relevant.

Have you checked your forecast on gov.uk and read past the likely headline (£179.60) to see what you have accrued to date and have e many more years you need to reach £179.60?

LV_426

Simon11 said:

I know that I haven't really considered the major financial aspects of having kids and supporting them at university/ purchasing their first house...

Thanks!

That's a big mistake. In a recent thread, this event was described as 'changing everything'. 

Bravepants

Also, although it doesn't bear thinking about, it's important to consider the possibility that one of you passes away before the other.

Would each of you be comfortable financially without the other?

jimi_man

You haven't really given enough info to make an educated guess. But in essence:

£30k from 50 to 68 is around £540k ignoring inflation. Then with full state pension from 68 you'd need £12k a year, so another £264k, which is slightly over £800k in total.

Obviously no allowance for inflation or anything else, but that's the very rough headline figure you need to be looking at. Any DB pension will reduce this obviously. 

Also it's another 35 years to State pension age so who knows what could happen in that time. 

FaceHead

The thing you have left out of the OP is your salary - you're contributing 17% of what? There are some clues to your joint income in the mortgage balance, and that you can give up 17% and live comfortably. If you lay your calculations out in more detail, people might provide helpful input. 

There is little chance that we (people in our early 30's) are going to get a state pension at 68. Whilst you can think of it in terms of life expectancy it really boils down to politics and what the national purse can afford. 

Retirement planning should be for a worst-realistic case scenario, so that you're not caught short. As such, it would be sensible to assume that the state pension age gets increased a decent amount in our time - either that or reducing the value of it as it can't rise above inflation forever. 


 

Silvertabby

Bravepants said:

Also, although it doesn't bear thinking about, it's important to consider the possibility that one of you passes away before the other.

Would each of you be comfortable financially without the other?

This.  So often on these boards, posters say that 'their' income in retirement will be £X per annum, but very few seem to consider the figures for the one left behind.

ex-pat_scot

You are clearly setting yourselves up nicely, but frankly at your stage I would be painting some very broad themes rather than making too specific plans.
Children change everything, not least financially. Trying to put any numbers on this is largely futile.
A few things to consider:

1. as a family, what is your ideal shape. Size. Timing. Number. Working pattern
2. from 1. what should work patterns look like? Eg are you planning to stop mid exam cycle?
3. what's your broad expectations on earning/ progression
4. from 3. how much can you save now, and when your patterns in 2 look like under stressed (family) conditions
5. pension, ISA, LISA, mortgage. You will need to understand what the tax efficient vehicles might be best used, and when.

AlphaKappa

Hi. You will probably need to give more information.

How much does the 17% contribution equate to
How is your pension invested / attitude to risk
You mention partners SPA is 55. Is that correct?
What age will your partner have access to her DB pension, and how much is it.
Children do change things to a large extent (holidays for a family, activities, etc. - and most especially if you want them privately educated). You need to project your "misery"  into the future.
On the face of it, it seems there is a large gap between where you are and where you need to be. However, the important thing is that it is now in focus, so you shouldn't do too badly.
Contribute as much as you can, as early as you can, as tax efficiently as you can, for as long as you can.
Remember to enjoy today, don't live the next decades on beans and toast.

Simon11

Dazed_and_C0nfused said:

State pension: Expenditure of £1k to fill two years, would give me 35 years of NI credits by 50

Have you checked your forecast on gov.uk and read past the likely headline (£179.60) to see what you have accrued to date and have e many more years you need to reach £179.60?

I already have 15 years, with potential to purchase two missing years. With 18 financial years till I am 50, then it is doable.


Bravepants said:

Also, although it doesn't bear thinking about, it's important to consider the possibility that one of you passes away before the other.

Would each of you be comfortable financially without the other?

Should be the case, and any pension pot accrued myself would go to her in the case I passed away. May require a few extra years of working and I have life insurance through work. My partner will have £20k pension per year through her pension/ state pension so not a bad position either.

The bigger issue rather than passing away, is the issue of splitting up and moving out. That really makes a whole change to the plan (note everything is fine ) 

FaceHead said:

The thing you have left out of the OP is your salary - you're contributing 17% of what? There are some clues to your joint income in the mortgage balance, and that you can give up 17% and live comfortably. If you lay your calculations out in more detail, people might provide helpful input. 

There is little chance that we (people in our early 30's) are going to get a state pension at 68. Whilst you can think of it in terms of life expectancy it really boils down to politics and what the national purse can afford. 

Retirement planning should be for a worst-realistic case scenario, so that you're not caught short. As such, it would be sensible to assume that the state pension age gets increased a decent amount in our time - either that or reducing the value of it as it can't rise above inflation forever. 


 

Its currently £75k p.a. and have just chucked my bonus into the pension to save tax otherwise I would only see half of it! Very comfortable job, which I could easily remain in for the next few years with great benefits and leave. Have reached a stage where I am not too bothered climbing the ladder and facing any stress.

On your last point, the worst case scenario would be needing to work an extra few years.

Currently risk on pension investment is in the high bracket.

ajfielden said:

Simon11 said:

I know that I haven't really considered the major financial aspects of having kids and supporting them at university/ purchasing their first house...

Thanks!

That's a big mistake. In a recent thread, this event was described as 'changing everything'. 

I have assumed that our month to month savings we have at the moment would support the child and with ongoing pay rises, we should be fine even if one of us goes part-time for a few days a week. Is there any thing specific I should budget or plan for?

LV_426

Simon11 said:

I have assumed that our month to month savings we have at the moment would support the child and with ongoing pay rises, we should be fine even if one of us goes part-time for a few days a week. Is there any thing specific I should budget or plan for?

A very, very difficult question to answer, if not impossible because everyone's situation is different.
In our case, we have two autistic spectrum daughters, who for various reasons have not got on well in mainstream education. I won't go into details as we'll be here all day, but the bottom line is that my wife has become full time educator, and has not had an earning job for about 20 years. This is a lifetime of income that we don't have. And bear in mind that this wasn't expected or planned for when they were younger.