FIRE Girls Pension Diary - Aim High & Dream Big

Firegirl

The more I read comments my next steps have to be working out what I need to retire.  This will give me a more realistic interm target to aim for I imagine, while aiming for my crazy dream 
I found going back to work in Jan really hard this year but now I’m fully motivated after coming up with this plan.

signature updated

Archerychick

Firegirl said:

The more I read comments my next steps have to be working out what I need to retire.  This will give me a more realistic interm target to aim for I imagine, while aiming for my crazy dream 
I found going back to work in Jan really hard this year but now I’m fully motivated after coming up with this plan.

signature updated

We are in quite similar situations. I’m a little younger, but no children. 

I earn a decent income, don’t live a what I’d call a lavish lifestyle because I don’t see the point of spending money on things that you don’t really need. Therefore all my earnings over the c£50k tax threshold are paid into my salary, and of the wages I do get through payroll I am firstly overpaying mortgage, maxing out ISA allowance plus some other savings.

mortgage has just under 2 years to go 🥳.

I have also not worked out how much I need to have in my pension to retire on, and am most likely paying too much into it - but I don’t see the point of paying 40% tax on something I don’t need at the moment 🤷‍♀️.

I also haven't worked out what my retirement age will be, I definitely don’t want to be working full time in my late 50’s, so I probably have ten years max of full time and then I do whatever I want for the rest of time!

michaels

Talking of what is possible, just checked what our numbers have done in the 8 years since I was 45 (average salary £62k), 1 Jan 2016, DW and I had pension savings of £250k.  1 Jan this year I had put 70k into DW pension pot (non earner) and my pension had gone to 720k plus a 25k DB (worth 625k compared as a 4% swr pot?)

Firegirl

mortgage has just under 2 years to go 🥳.

I have also not worked out how much I need to have in my pension to retire on, and am most likely paying too much into it - but I don’t see the point of paying 40% tax on something I don’t need at the moment 🤷‍♀️.

I also haven't worked out what my retirement age will be

Serious well done on your mortgage! I find it hard to give up on MFW but as it comes out of normal house bills account with my OH I can just let that roll and it’s better for me to make use of tax efficiencies.  (Hubby not a big spender but not good with finances). My financial adviser says to always do some ISA and some pension. When retired the ISA can be drawn tax free. The pension you have 25% tax free cash and then your taxed as normal on anything else. There are various ways we can do it when the time comes with annuities etc.  I haven’t fully looked into it yet so don’t take my tips yet!  

I think we’re the same in that we are saving as much as we can to pension, ISA, mortgage but both of us need to work out what amount we would need to retire….when we get there we then really have the freedom to choose:)

Firegirl

michaels said:

Talking of what is possible, just checked what our numbers have done in the 8 years since I was 45 (average salary £62k), 1 Jan 201, DW and I had pension savings of £250k.  1 Jan this year I had put 70k into DW pension pot (non earner) and my pension had gone to 720k plus a 25k DB (worth 625k compared as a 4% swr pot?)

Wow this is amazing! Thanks for sharing! 

ukindexinvestor

seems very achievable 

Firegirl

ukindexinvestor said:

seems very achievable 

Thanks so much!  Imagine if I actually do it! Would be amazing!

Pat38493

Firegirl said:

mortgage has just under 2 years to go 🥳.

I have also not worked out how much I need to have in my pension to retire on, and am most likely paying too much into it - but I don’t see the point of paying 40% tax on something I don’t need at the moment 🤷‍♀️.

I also haven't worked out what my retirement age will be

Serious well done on your mortgage! I find it hard to give up on MFW but as it comes out of normal house bills account with my OH I can just let that roll and it’s better for me to make use of tax efficiencies.  (Hubby not a big spender but not good with finances). My financial adviser says to always do some ISA and some pension. When retired the ISA can be drawn tax free. The pension you have 25% tax free cash and then your taxed as normal on anything else. There are various ways we can do it when the time comes with annuities etc.  I haven’t fully looked into it yet so don’t take my tips yet!  

I think we’re the same in that we are saving as much as we can to pension, ISA, mortgage but both of us need to work out what amount we would need to retire….when we get there we then really have the freedom to choose:)

If you are a higher rate taxpayer, which I guess you must be if you can afford to save 3K per month, pension beats isa for the vast majority of cases.  40% tax relief on the way in and probably only 20% tax on 75% of the amount later.  Money you paid into your ISA after already paying 40% tax on it will be unlikely to ever catch up.  

In my opinion the only reason to be saving into and ISA after paying 40% tax on it is if you think you will need to take the money out before you have access to your pensions.  Therefore I would be curious as to your financial adviser’s detailed reasoning on this point.

Firegirl

Pat38493 

In my opinion the only reason to be saving into and ISA after paying 40% tax on it is if you think you will need to take the money out before you have access to your pensions.  Therefore I would be curious as to your financial adviser’s detailed reasoning on this point.

Exactly this, use ISA to bridge gap between retiring and 57.  I agree Pension salary sacrifice to bring down to below high tax bracket, then ISA.  ISA can then also be used for big spends such as a car or big holidays so retirement income doesn’t fall into high tax bracket either.

michaels

Firegirl said:

Pat38493 

In my opinion the only reason to be saving into and ISA after paying 40% tax on it is if you think you will need to take the money out before you have access to your pensions.  Therefore I would be curious as to your financial adviser’s detailed reasoning on this point.

Exactly this, use ISA to bridge gap between retiring and 57.  I agree Pension salary sacrifice to bring down to below high tax bracket, then ISA.  ISA can then also be used for big spends such as a car or big holidays so retirement income doesn’t fall into high tax bracket either.

Offset mortgage is another option for bridging the gap