Realistic pension gains?

Workerdrone

Like with most things, I tend to be different. When I say I pay in £100, i mean I put £100 of my money in. I only really focus on what I put in, the rest (employer, tax relief) is what it is. I'm the only part of the equation that can vary - their parts are a result of my part so I don't bother thinking about it.*

It helps to think this was, especially when it comes to times where the market has gone down. Much better the think my contribution of £80 has gone down in value than (£80+10% Employer + £20 tax relief = whatever) number has gone down.

That said I never taught myself to think this way so when I look at a 30k loss I mentally go Argh! even though a good chunk of that is employers contribution, taxman contribution and growth.

I.e I haven't lost as much of the sweat off my brow as I think

Albermarle

Not interested in a lavish lifestyle in retirement. Yes it'd be nice. Who wouldn't want an endless pot of money? But to stay happy & active, a lot of our happiness comes from things that don't cost any money, or very little (gardening, walking, hiking, cycling.....)

So if you are not interested in a lavish lifestyle in retirement, then why are you worrying so much about your perceived low income, and the perceived high income of others with the associated large pension pots?

It could be a good exercise to really work out how much you are likely to spend in retirement, and when you would like to retire ( being realistic in both cases). This general guide might help, plus there are many discussions on this forum about spending in retirement. Some couples manage OK on two state pensions, although for most that is not enough.

Home - PLSA - Retirement Living Standards

You can hope that at least your pension pots /Lisa's etc will keep pace with inflation. You can make a rule of thumb assumption that your pension pots will produce an annual income of 4% of their value. Do not forget to take into account state pensions and your partners projected NHS pension. In this case you could take more from your pension pots from say 60 to 67 and less afterwards. It is not that simple but it will give you an idea what you should be aiming for in terms of building up a pension pot/savings/investments. rather than just getting numbers from internet calculators.

B0bbyEwing

Albermarle said:

So if you are not interested in a lavish lifestyle in retirement, then why are you worrying so much about your perceived low income, and the perceived high income of others with the associated large pension pots?

You sure you want to go inside my head? It's not a very tidy place to be Welcome to how my mind works.

I am a natural worrier. No good saying don't worry about things. That's like telling an obese person to eat less. It's just what I do. Sometimes it's with good reason, other times it's needless, but it is what it is.

In this case, I wasn't so much worried, in the sense that I'm struggling to sleep at night. More curious bordering on concern - asking the question, am I doing enough. Sure I could do better but am I doing enough. Being ahead is great, being on track is good but being behind isn't good.
So while I don't see that we'll be living a costly retirement, I do still wonder A) what we'll need yearly what size pot and at what age to say we can retire now & be relatively comfortable.

And the not knowing is what then sparks the concern.

The banking & investing forums here kind of go hand-in-hand. Take the banking for example - real easy. This number is bigger than that number therefore this account pays more, the end. 

Investing is different. Do I go here, do I go there, will this be better, will that be better, come on time is ticking, make a decision. Was that the right decision, what if it wasn't, ok relax there is no right, but was it a good decision, was it a bad decision?

I wonder a lot.

Albermarle said:
It could be a good exercise to really work out how much you are likely to spend in retirement, and when you would like to retire ( being realistic in both cases). This general guide might help, plus there are many discussions on this forum about spending in retirement. Some couples manage OK on two state pensions, although for most that is not enough.

Home - PLSA - Retirement Living Standards

Thanks for the link.

As mentioned, we've started a budget this month & the hope is that this becomes a habit from here onwards. 
The rise in energy, fuel, food is what sparked it but I've wanted to do it for a long time for various reasons.

Getting some kind of grasp on what we spend (how much) and on what it is spent with one eye on retirement is one of those reasons. 

Albermarle

Investing is different. Do I go here, do I go there, will this be better, will that be better, come on time is ticking, make a decision. Was that the right decision, what if it wasn't, ok relax there is no right, but was it a good decision, was it a bad decision?

Of course there is a lot of uncertainty in investing. However just making the point that although you might never build up a pot of the size you often see mentioned on here, but it could still be a bigger pot than you actually need and probably way above average. 

anonmoose

I think the way you are going you will have  more than the average uk pot. You can look online what statistics say is the average but more importantly you need to have some idea of what you need. An easy way of doing it all things equal is look at your take home minus your pension and LISA contributions and that is what you are living on now.

I assume a drawdown of 3.5/4% is reasonable for us. We are aiming for a pot of £250k each from SP age onwards so we could draw an extra £8 or 10k each if needed in additionto our SP. 

Between our (hopeful) early retirement and SP its a mixture of part time work, whatever savings we can build and possibly downsizing/rental investment. So a lot of flexibility based on how our pot has performed and the market conditions at the time. 

I am happy to be flexible so I think that takes the stress off. Anytime before SP we will have the ability to work (all being well) if we really have to. 

But I wouldn't spend to much time looking at averages, it really doesn't tell you much.

Edited to add: the pot in real terms will be bigger than that as I work out what contributions I need and figure investment growth and inflation probably balance each other out. I am aiming for £250k by age 55 then not touching it until 67. It hurts my brain trying to forecast in other ways!

Audaxer

B0bbyEwing said:

Comparison this year

Jan-Aug, same contributions but once you take out those, it's only risen £600 / 1.45%

I would say that is an excellent performance so far this year. Most investment portfolios are still showing a loss this year to date.

bostonerimus

B0bbyEwing said:

Albermarle said:

So if you are not interested in a lavish lifestyle in retirement, then why are you worrying so much about your perceived low income, and the perceived high income of others with the associated large pension pots?

You sure you want to go inside my head? It's not a very tidy place to be Welcome to how my mind works.

I am a natural worrier. No good saying don't worry about things. That's like telling an obese person to eat less. It's just what I do. Sometimes it's with good reason, other times it's needless, but it is what it is.

In this case, I wasn't so much worried, in the sense that I'm struggling to sleep at night. More curious bordering on concern - asking the question, am I doing enough. Sure I could do better but am I doing enough. Being ahead is great, being on track is good but being behind isn't good.
So while I don't see that we'll be living a costly retirement, I do still wonder A) what we'll need yearly what size pot and at what age to say we can retire now & be relatively comfortable.

And the not knowing is what then sparks the concern.

The banking & investing forums here kind of go hand-in-hand. Take the banking for example - real easy. This number is bigger than that number therefore this account pays more, the end. 

Investing is different. Do I go here, do I go there, will this be better, will that be better, come on time is ticking, make a decision. Was that the right decision, what if it wasn't, ok relax there is no right, but was it a good decision, was it a bad decision?

I wonder a lot.

There are almost an infinite set of adequate solutions to your retirement problem, but you are falling into the paralysis and paranoia that can be induced by the choice. Remember that the amount you contribute and when you start will probably be the most inportant factors in how well you do. One way to stop worrying is to follow some simple guidelines:

1) Do a budget so you understand your spending and how much you might need.
2) Contribute as much as you can to pensions and ISAs
3) Use low cost index tracker funds, there are plenty of simple portfolios on line. Stop worrying and don't think that there is some magical best solution.
4) Get familiar with compound interest and run a few simulations using various annual gains and contribution amounts and then see if an initial 4% withdrawal is enough retirement income for you.

Terron

Which does a survey of retirement spending each year. This year that showed that a couple living a comfortable retirement spend £28000pa. Call it £30k.
Your wife has her own pension, so assume you need to contribute half of that - £15k pa
The state pension will cover roughly £10k
So you need a pension that will pay £5k pa.
Using the 4% figure you need a pot of £125k or using the 3% one you need £165k
All figures in todays values.

Do those numbers look achievable to you?

P.S. Average (median) earnings are about £30k. You aren't a mile off.

anonmoose

Although bear in mind the bit before SP is the expensive bit and B0bby said he would like to retire early so that would bump up the amounts needed.

LV_426

Audaxer said:

B0bbyEwing said:

Comparison this year

Jan-Aug, same contributions but once you take out those, it's only risen £600 / 1.45%

I would say that is an excellent performance so far this year. Most investment portfolios are still showing a loss this year to date.

Mine is. Although starting to pick up now.