Average pension pot on retirement and whats your aim ?

DT2001

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund).  

Considering current and likely future inflation we will all need to update any targets we made for our pension pots in the last year or two.

Have you worked out your own inflation figure?
My fixed energy quote is £360+ p.m. more than at the moment adding 15%+ to my ‘basic’ spend.
This will focus my mind on a search for a plot of land to build a Passivehaus. Once achieved the number will drop.
The other alternative is spend less on luxuries if keeping with same retirement date.

Plenty of food for thought.

Steve182

DT2001 said:

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund).  

Considering current and likely future inflation we will all need to update any targets we made for our pension pots in the last year or two.

Have you worked out your own inflation figure?
My fixed energy quote is £360+ p.m. more than at the moment adding 15%+ to my ‘basic’ spend.
This will focus my mind on a search for a plot of land to build a Passivehaus. Once achieved the number will drop.
The other alternative is spend less on luxuries if keeping with same retirement date.

Plenty of food for thought.

I've not worked out my own inflation figure. I am very fortunate in that most or all of my increase in energy costs will be offset by lower company car tax and zero car "fuel" expenses by changing the company car from hybrid to an EV, which will be charged at work.

I doubt I will learn to spend less, but if I have to retire at 58 or 60 instead of 56 for example, so be it...

Steve182

Thrugelmir said:

Steve182 said:

Sunnylifeover50plan said:

Steve182 said:

lisyloo said:

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

Do these figures mean you were previously expecting 0% inflation?
it’s bad I agree but surely you were expecting some, so it should be less than the headline figures as you had some factored in anyway?

I had factored in 2% average long term. I'm now factoring in 7% for 2022 then 4% for 2023, hopefully back to 2% in 2024. Just a complete guess.....

Out of interest what have you factored for growth/ returns? I also had the 2% figure for inflation long term - things have changed quite quickly even if it turns out to be short term.. 

For pension pot growth, prior to retirement I had, until recently, factored in 6% above inflation. This is because I'm happy to have a  fairly high risk portfolio and don't need to retire at 56 so I can adjust my plans and delay retirement as required. Post retirement I plan around 5% drawdown from age 56 to 67, reducing to 3.5% once my spouse and I both have full SP. I have assumed inflation at 2% average, obviously far below what we expect in 2022/2023

That’s optimistic by any benchmark. Not least that the figure is after “costs” as well. An extended bull market fuelled by loose fiscal monetary policy has certainly raised expectations to unrealistic levels. 

Indeed it is optimistic. I've moved much of my portfolio away from growth shares and my current strategy revolves around buying undervalued low P/E shares that I think will perform well and hopefully grow in the next couple of years, mining and gas are my particular favourites at the moment. 

I'm trying to outperform the market rather than holding a diverse portfolio, as are you I think? Time will tell whether or not we will succeed.  

Dh6

I‘ve been basing my long term investment returns in my ISA,LISA and SIPP on 2% above inflation. ( 100% equities, age 35 ) I’m relatively new to investing and thought that 2% may be conservative, now I’m not so sure. 

At 2% average I should be able to achieve my goal of early retirement around age 50. If this doesn’t turn out to be the case I will continue to work part time until I have enough. 

I may continue to work part time regardless as I enjoy my job but it would be nice to have a choice.

DH

Steve182

Dh6 said:

I‘ve been basing my long term investment returns in my ISA,LISA and SIPP on 2% above inflation. ( 100% equities, age 35 ) I’m relatively new to investing and thought that 2% may be conservative, now I’m not so sure. 

At 2% average I should be able to achieve my goal of early retirement around age 50. If this doesn’t turn out to be the case I will continue to work part time until I have enough. 

I may continue to work part time regardless as I enjoy my job but it would be nice to have a choice.

DH

The average S & P 500 return for the past 50 years, dividends reinvested was 6.5% above inflation

https://dqydj.com/sp-500-return-calculator/

While such stats may give you the long term average, which may/may not be repeated, they certainly do not indicate that such a return should be expected over the next decade.

Do a calc on that site for the 70's and it will be negative.

Dh6

I’m well aware of the above figures quoted Steve. 

I think it would be reckless to assume 6.5% PA going forward especially as I intend to start drawing the cash in 15 years time.

I’ve just plugged 0% into my spreadsheet and it would mean roughly having to work another 3 years which isn’t the end of the world as like I said, I enjoy my job.

My attitude towards it, is to save as much as I can, as early as I can, whilst giving my young children the childhood they deserve and whatever the investment returns are, so be it!

DH

SouthCoastBoy

DT2001 said:

SouthCoastBoy said:

Steve182 said:

lisyloo said:

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

Do these figures mean you were previously expecting 0% inflation?
it’s bad I agree but surely you were expecting some, so it should be less than the headline figures as you had some factored in anyway?

I had factored in 2% average long term. I'm now factoring in 7% for 2022 then 4% for 2023, hopefully back to 2% in 2024. Just a complete guess.....

I think inflation figures will be a lot higher. I am currently modelling 10, 12, 10 ,9, 8 for the next 5 years and growth of 0,0,3,3,3. Think we are going to be in for a very rocky time

What does that do to your retirement date or will you adjust spending?

I have put retirement date out. Now going to 60. I had anticipated high inflation around 12 to 18 mths ago so that decision was mad a while ago. I never bought into the transitory theory, so have also amended some of my portfolio accordingly.