Mid-life musings

Albermarle

Bumblingbee said:

@Yankee24 Thanks, that's good food for thought, it's so hard to predict the future and obviously will readjust as we go, but I don't want to sacrifice the today for tomorrow, so need to find that happy mid point. Are you still working or retired now? What does the £40 - £60k look like in terms of a breakdown - holidays etc?

There a lot of different retirement expenditure figures published, and commented on in this forum.
Some couples live off two state pensions ( £21K) but it is a pretty basic lifestyle.
Two state pensions + £5K/£10K pa gives some more flexibility.
Two state pensions + £20K pa means you can live a fairly 'normal' life( opinions vary on what normal means) with a decent car and a couple of  holidays a year.
Comfortable means needing up to £50K pa ( opinions vary on what comfortable means)
More than that for more of a luxury retirement but sky's the limit depending on what level of luxury one means.

However it is not as simple as that, as the earlier you retire ( before state pension arrives) the more money you need to fund the income.
Plus some people include capital expenditure ( new car, house improvements etc )  in their income figures and others have a separate pot.
Also some people are natural spenders, so will need more. Whilst others ( many examples on this forum) continue to be careful with money, even when they do not actually need to be. Old habits die hard !

Bumblingbee

Thanks to those that have commented and shared their thoughts. Yes the £75k will be part of my earnt income for the year, albeit a one off event that is giving me the lump sum. 

I was playing around with retirement planning tools and based on mid growth - which we all know may or may not be achieved, and different figures will be used by different companies it suggested that our current pot (with £75k included) would be worth near to £1million by the time we retire. 

I think for planning now, until we get closer we work on needing an income of £40k per annum, we will both retire at 65 latest so working on that with state pension which will be £23,000 per year, assuming 25 years life expectancy we will need a pot of £425,000 which we have pretty much achieved. Ideal would be to retire at 58 (the youngest we can draw pensions) so another 10 years at £40,000 means we need a pot of £825,000. If the state pension is removed we can default to plan b quite easily (65) and work for longer. 

This is of course all hypothetical as we will replan as needed as time goes on but I want to focus on getting closer to that number and then perhaps look at reducing hours. 

Bumblingbee

And forgot to add, I agree with comments regarding supporting children etc, but in my rough plan we will achieve this when we stop paying our mortgage

hugheskevi

When considering retirement in many years, you need to consider the difference between real terms and earnings terms.

In normal circumstances, earnings increase more rapidly than prices. Over short periods of time the difference is not too significant, but over decades it has a significant effect.

To illustrate, £30,000 p/a today is about 128% of the Minimum Wage. In 30 years time if that £30,000 increases in line with prices it will be about 80% of the Minimum Wage, based on Office for Budgetary Responsibility forecasts.

It may well be prudent to assume your income needs increase in line with earnings to State Pension age and by prices thereafter. That would retain your standard of living relative to wider society.

nicknameless

I know it's been said already in the thread but just double check paying off your mortgage is the best thing financially vs other options.  Had we paid towards our mortgage instead of pensions and investments over the past 15 or so years then there's no way we'd be near a position to retire at the end of next year like I now think we are.  Mortgage rates have risen I know making the decision more difficult but we've got a mortgage running for the next 20 years at a fixed low rate currently and have no intention to make a dent in that vs pension payments whilst we are working.

Knowing you could pay it off if you needed is surely enough security.

Albermarle

 If the state pension is removed we can default to plan b quite easily (65) and work for longer. 

People have been worrying for the past 50 years that the SP will be abolished. In the last 10?years it has in fact been increased significantly in real terms, and the generous Triple Lock continues to apply.
It would be political suicide for any party to abolish it, so it will never happen.
Possibly one day it will be partly means tested, but even that seems unlikely.

FIREDreamer

Albermarle said:

 If the state pension is removed we can default to plan b quite easily (65) and work for longer. 

People have been worrying for the past 50 years that the SP will be abolished. In the last 10?years it has in fact been increased significantly in real terms, and the generous Triple Lock continues to apply.
It would be political suicide for any party to abolish it, so it will never happen.
Possibly one day it will be partly means tested, but even that seems unlikely.

I hope you’re right.

If means tested it will send the wrong message, given the pension is worth £250k. Even people on a £50k pa pension, the state pension is a decent chunk to lose out on.

Bumblingbee

I think it's unlikely that the state pension would be abolished, but I guess who knows what will happen! I certainly couldn't have foreseen a lot of the last 5-10 years 🤣

With regards to paying off our mortgage, there perhaps is more to be gained via investments but it doesn't interest me. Certainty and security is something I value, there is plenty of time after that to try and make gains if we wish and it will give us financial freedom. 

Likewise when we hit the pension number I'd expect us still to be working and contributing at least whatever is required for our employers contributions, so I'd expect this to bridge the gap between the value today vs the value in the future - but I can worry about that when we hit the number 

kimwp

Bumblingbee said:

I think it's unlikely that the state pension would be abolished, but I guess who knows what will happen! I certainly couldn't have foreseen a lot of the last 5-10 years 🤣

With regards to paying off our mortgage, there perhaps is more to be gained via investments but it doesn't interest me. Certainty and security is something I value, there is plenty of time after that to try and make gains if we wish and it will give us financial freedom. 

Likewise when we hit the pension number I'd expect us still to be working and contributing at least whatever is required for our employers contributions, so I'd expect this to bridge the gap between the value today vs the value in the future - but I can worry about that when we hit the number 

I chose to pay off my mortgage before thinking more seriously about my pension (other than setting it at the max that would be employer matched). I would probably be better off financially if I'd put more in my pension early, but when I think about the peace of mind I had in 2020 when people were being laid off at work and I didn't have to worry about paying my mortgage - no regrets about my choice.

nicknameless

kimwp said:

Bumblingbee said:

I think it's unlikely that the state pension would be abolished, but I guess who knows what will happen! I certainly couldn't have foreseen a lot of the last 5-10 years 🤣

With regards to paying off our mortgage, there perhaps is more to be gained via investments but it doesn't interest me. Certainty and security is something I value, there is plenty of time after that to try and make gains if we wish and it will give us financial freedom. 

Likewise when we hit the pension number I'd expect us still to be working and contributing at least whatever is required for our employers contributions, so I'd expect this to bridge the gap between the value today vs the value in the future - but I can worry about that when we hit the number 

I chose to pay off my mortgage before thinking more seriously about my pension (other than setting it at the max that would be employer matched). I would probably be better off financially if I'd put more in my pension early, but when I think about the peace of mind I had in 2020 when people were being laid off at work and I didn't have to worry about paying my mortgage - no regrets about my choice.

Understand that completely to an extent.  But, for example, if at any point someone is paying off their mortgage in lieu of higher rate tax relief in a pension (assuming they will not be HR tax payer in retirement) then they need to give their head a shake IMO.  Personally I feel much more secure having financial independence next year than 3-4 years hence.  And needing that security for the what ifs implies you had no emergency fund to cope .......