Retirement planning at 29

Robin9

p00hsticks said:

Robin9 said:

Monkeysinatree said:

Hi all,

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Current monthly spending: c £1.3k including £500 budget for holidays as we enjoy the outdoors.

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By the time you get to 45  -  the State Pension will be over 70 -  that's a long time to fund from investments.

And unless the OP is prepared to make some voluntary contributions for at least some of the years between 45 and 70 (at a cost of  > £1k a year plus by then) they are unlikely to qualify for a full state pension even when they reach 70.  

To add to my first comment - and by the time you get to 70 it will be 75 !

OldScientist

Monkeysinatree said:

Hi all,

I am planning my retirement, currently 29 years old and would ideally like to retire at 45. 

My current stats are as below.

cash in bank (incl. Savings account): £22k

Pension: £75k (I contribute 19% and my employer contributes 12%)

Stocks and shares ISA via Vanguard: £54k (45% in s&p 500)

Employer shares: £50k - only realised at leaving the company or if I sell internally once a year

Current salary in London: £80k, bonus c. 20% 

Current monthly spending: c £1.3k including £500 budget for holidays as we enjoy the outdoors.

Current liabilities: one dog - no kids.

I do not own any physical assets and lucky to be living with my spouse who owns her home outright. 

I am seriously considering a buy to let to help with retirement income, however with the interest rates at an all time high, I am reevaluating this option. However, one of my insecurities is not owning a physical asset (e.g. house) and how this may affect my ability to grow equity. I would like your opinions on anything else I could consider in my current situation and from your experiences, anything I could do to reach my retirement goal by 45.

Thank you.

I don't know how much in the way of calculation you have already done, but assuming your salary goes up with inflation over the next 16 years and your pension contribution rates stay the same then on a quick, and very rough, spreadsheet calculation:

If your pension investments return 0% real over the next 16 years, then your pension pot (which of course you won't be able to access until 57 so you will need to add to your other savings to cover the first 12 years of retirement - I've not included this) will be worth about 472k (16*24.8k+75) in today's money. If they return 3% real then that goes up to £616k and if 6% real, about £816k.

As other have said, a good starting point in planning is to look at safe withdrawal rates - these are usually quoted for 30 years (i.e., for conventional retirees). As a 29 year old, you have a 10% chance of living to 100 ( https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07 ), so might plan for a 55 year retirement from the age of 45. For that length of retirement an inflation adjusted withdrawal rate of approximately 2.5% might be achievable (see https://www.2020financial.co.uk/pension-drawdown-calculator/ I ran it with a 80% allocation to stocks and 20% to bonds for a 55 year retirement). Therefore your DC income might be around £12-20k per year in today's money depending on the size of the initial pension pot. Of course, the state pension provide an income boost about 25 years after retirement.

Pipthecat

This is a useful calculator to see what maximising your ISA could do in terms of bridging the gap between finishing at 45 and accessing your pension ISA Investment calculator - Aviva

QrizB

hugheskevi said:

• Children will massively complicate everything, are these part of your plan? If so, very careful planning will be required around them.

As someone who had a plan to retire at 50 that was broadly on track until I had children, I would suggest that if you're currently 29 and plan to retire at 45, you should have already produced any children you intend to have.

Otherwise, your earliest retirement date is likely to be no sooner than 16 years after the birth of your final child - and more likely 20+ years.

Sea_Shell

It's good to have a goal, but sometimes life gets in the way.   A lot can change in the next 20 years!!

We had similar goals at your age.    Ours included paying off a joint mortgage by 40.   With eyes then set at retirement at 50.

We achieved both, ahead of schedule, but probably only because we didn't have kids and we are naturally low spenders and, for a time, high earners.

We didn't go without, during our working life, just didn't go 'overboard' with spends, like some of our peers.

Albermarle

Sea_Shell said:

It's good to have a goal, but sometimes life gets in the way.   A lot can change in the next 20 years!!

We had similar goals at your age.    Ours included paying off a joint mortgage by 40.   With eyes then set at retirement at 50.

We achieved both, ahead of schedule, but probably only because we didn't have kids and we are naturally low spenders and, for a time, high earners.

We didn't go without, during our working life, just didn't go 'overboard' with spends, like some of our peers.

Having two people earning is a big advantage, especially if the salaries are good, and would make an early retirement at 45/50 more feasible . However as you say the spending has to be under pretty strict control as well.