The other side of a flippant and immature mindset. First steps. Could be long.

Springfield1970

It sounds like you are off to a good start.  I was 44 when I bought my first property on my own as a single parent, and started my pension 2 years later.

I spent my whole teens 20s and 30s having a great time, working, but then also studying, and just being a musician, and travelling, taking time to find myself. I've always supported myself, but lived on little.

Times are tight at the moment with fiscal drag (I call it FISTAL drag, because the gov are shafting us), mortgage overpayments, and pension payments, but I'n happy, I dont' regret not starting earlier or taking workplace pensions.

I'll have paid off the mortgage at 61 and plan to stop investing, and let the pension grow on its own until SP age 67/68. It'll be around £300k and I'll take 3-4% draw down.  I'm hoping it keeps growing.  I'm also considering buying an annuity at some point.

I'll have a semi retirement from 61 with lots of travel, and have the option to retire when I want.
It's good to start early but if you're like me, you'll be on a higher salary later and able to throw more at the mortgage and the pension.

BrotherUuurgh

@barnstar2077 - My wife does work but there are a couple of factors, the biggest being quite an age gap. Without going too much into it, it's probably best that I consider my own income only. 

A S&S LISA is a shortlisted saving option for me now. 25% top up is too good to pass up. I do have one or two reservations about them for me specifically though: one is that I can't draw without penalty until 60. I would like to plan (in a more worst-case scenario) for the money to be available around mid 50's. The other is that the maximum I'll be able to contribute would be £80k including the 25% bonus - I can't pay any more in after turning 50. Hopefully a good market could make it grow a bit more, but it feels a bit limiting nonetheless. Calculators project value of approx £96k after 16 years at 5%, growing to £156k with no further contributions for a further 10yrs to 60. Decent final value for sure, but just feels a bit restrictive. I sound negative but just trying to understand. This is overall a good option for me considering current employer pays max 3% pension contribution.

@Springfield1970 - Sounds like I could be following a similar timeline to yourself. Good to hear you managed to get on the ladder, couldn't have been easy at 44. If you don't mind, how did you manage to raise your deposit under your circumstances? It would be great to hear from someone with "similar experience".

Khandi

Apologies, long ramble... I am moved by your story. I can't give you financial advice because I've stuffed up my own finances down the years also by a misspent youth and neglecting my investments - too scared to even look at them... even to the extent that at 70 I still have two unliberated pensions I have never dealt with. (Procrastination and lack of faith in people is a lifetime's problem for me). Thankfully, and now with no debts, I get by on the government and another small pension. I have to be frugal but I'm happy with my life and have most of what I need.

Buy that home if you possibly can. I really, really couldn't afford to buy a house when I was in my 30s, but under Thatcher's buy your own council house scheme, I did just that, even though I was massively worried about taking it on. At the start it was very hard making the 13% interest payments every month but eventually the economy turned around and the payments got a lot easier. It's a cliche but it was the best investment I ever made; that, and improving my educational qualifications while I worked.

How can you make this possible? Here's an idea... Have you thought about buying a house you could live in but that could be adapted for partial rental. For example, an upper floor or just subletting a couple of rooms? I know this takes some investment outlay, and having someone in your home is not everybody's ideal, but I say this because I have seen friends and family do this very successfully. It's what many people of my generation had to do to get on the property ladder.

It's an extreme example but one of my friends opened a B&B because she wanted to retire early but couldn't afford to be entirely without some form of income. Her success was that she planned and researched the project properly. She first hired a chartered planner to look at several potential properties for suitability and to make layout plans. This turned out to be money very well spent. She then went on to buy a narrow, mid-terrace Victorian house, made living quarters for herself and partner on the ground floor, and offered B&B in the rest of the rooms - right up to the converted attic - in total about six rooms, I believe. I'm not suggesting you become a landlord on that scale but some sort of compromise might take some of the stress out of such a big decision. It might even help you pay off some of that mortgage earlier, so you can remortgage your way out of sub-letting, and progress more quickly on the property ladder.

You mention that you are worried about a back injury. Have you had a formal diagnosis - one that you are completely satisfied with? I ask because I have had ill-health all my working life and I know how important it is to know exactly what health issues you're dealing with. Most of my life I took the same approach with my health that I did with my investments and largely tried to ignore them. That was until it was too late and I had to medically retire myself when I could no longer work. That attitude did leave me in trouble because I missed out on a few years NICs to my govt pension and I'm paying the penalty for that now. I also didn't know that the self-employed could even claim benefits! That is a myth that needs to be well and truly busted. Fortunately these days, all is not lost if you become ill. In my own experience, I have been very well advised and fairly treated by our benefits' system, even though I never wanted to be in this position. Some of that advice surprisingly came directly from the DWP, despite their poor reputation in such things.

Maybe you are sorted for a proper diagnosis. If that's the case, ensure that you retain all your diagnosis paperwork so that you can make the appropriate claim if that's ever necessary. In fact, if the injury currently affects your ability to work you may even be able to claim now and still carry on working.

You have done so well on your journey, please look after yourself and remember that it's you who is your number one asset.

BrotherUuurgh

@Khandi - Thank you for sharing your experiences, I appreciate it. 

I really would like to own my own house, I just don't think it's going to be possible without coming at the expense of something else equally significant/important. As I say, the only way I think that'll happen is if there were to be any inheritance from family. I've not got the sweetest taste there due to a conversation or two that have been had - innocent ones, but ones that I believe have given away a lot more info than they intended. I don't think there will be anything left for me, so I've got to try to work with what I have in front of me today which is a career in a manual handling oriented job on a wage just shy of average (though overtime really boosts it (at the cost of my mental and physical comfort of course)). It's going to be hard to make that happen as well as a pension. A good idea on the subletting, though my gut is that I couldn't be happy with that sort of arrangement. I've contemplated asking the HA whether they'd let us buy our current home from them, but even then, all I can think about is how I'd be financially trapped for a while in an area I absolutely hate. I hope my response isn't too dismissive, again, I'm grateful for you sharing.

I've not had a proper diagnosis on my back as such, at least, I don't think I have(?), but I've had appointment after appointment about the increasing pain the last couple years, an MRI, and an absolute cop out of a consultant appointment the day I got back from my honeymoon, which takes me to today where I'm on strong daily pain relief and generally (physically) miserable. They'd said the scans show a crushed/bulging/slipped disc in my back (the diagnosis?), which of course is "wear and tear". A tangible and audible "pop" in your head and spine undoubtedly signifies the arrival of wear and tear. At 30yrs old. Nothing to see here..! I'd waited nearly two years for a five minute appointment. I've had longer GP appointments for hayfever. I'll stop talking too much as I'm still extremely resentful of the consultant dismissing me like that. I wind myself up very easily. Anyway, due to this I'm starting to find my line of work very difficult, so this is why I'd like to plan for an early retirement fund. I do currently have an application in for PIP, but don't have much hope. "Everyone" has a "bad back" and all that lark.

I would love to become a B1 aircraft mechanic, that would be the dream for me, if not pilot! The trouble is finding the time and money to be able to support a higher level of education that this sort of role requires. I've no doubt that if I had the time and money I could make it happen, however there's a house and bills to pay for, emergencies to save for, debt to pay off, food to put on the table, and that can't be done on an apprenticeship wage.

I feel trapped   

crv1963

BrotherUuurgh: I have read all the way through your thread, so my comments will include replying to some of the additional points that you and other contributors have made.

Firstly- well done to you for turning your life around, making positive changes and facing reality, even if in my opinion you are looking at worst case events! You are in a small minority of your age group for paying such attention to your future!

BrotherUuurgh said:

Apologies if this is the wrong forum, but this is mostly pension related so felt it the best fit... I'm feeling more and more stressed so need to get this off my chest at the very least.

My teens twenties were an overall terrible time for me. I can honestly say that. Without a life story, I got sucked into the darker side of the big boy's world. Smoking, alcohol, gambling, payday loans, the law and all those joyful things were in some way a significant part of my life, and really helped shape what this period in my life became.

Lots of people have had a misspent youth and recovered and moved forward and that is what you are doing. Learn the lesson and move on, don't look back because that's not the direction you are travelling, you are moving forward.

After an ultimatum delivered to me by the universe itself, I found a rock bottom but some stability as well. These years left me with a real hateful, selfish, ignorant outlook on life, as well as a five figure debt. I'd been in and out of work, paid small amounts into various workplace pensions but eventually opted out of them because I'd need the cash more. I won't make it to retirement age. Even if I do, the Government will HAVE to keep me. I'll have paid all my taxes, it'll be time for them to pay for me. Blah blah blah. I'm currently 32 with an effectively zero pension pot and five figure debt again. 

This is your starting point, there are others better placed and others in a worse position, that is their journey, this is yours!

Up to today, I've gradually shifted this parasitic mindset and I'm now seriously thinking about things. How to play the big boy's world game properly. My personal finances are now dominating most aspects of my every day life. I'm actively clearing my debt, making overpayments, refinancing to better rates, my reckless spending is hugely reducing. I'm starting/learning to form good saving habits, and thinking about my financial future. The first few points are a relative walk in the park compared to preparing for the future. This is why I'm posting here to start to draw on different points of view, advice, experiences to try and get a better understanding of where I am now, where I want to be, what it'll take to get there. So, I believe I could commit to one or the other here - a property or a pension. I am doubtful of being able to achieve both, but to do one or the other to a good standard would be enough for me. I struggle with articulating my thoughts properly and critical thinking as it rapidly turns into stress and anxiety so please bear with me.

You're at the beginning, so don't rule out options that you might have, personal finance is not all one thing or another but lots of things that add up to the bigger picture!

Questions, thoughts, in no particular order:
1) I'm trying to start to figure out what sort of final pot value I need to aim for. Let's say I'd like today's standard of living when I retire. When I use calculators to forecast a pension pot, and I input that I'd like £30k/yr, is this number the same as £30k in today's value of £30k? eg, £100k 100 years ago was only £100 or whatever..? Will I actually need to aim for a higher annual amount than that to account for inflation? Whichever one this is obviously makes a huge difference to the overall approach required, and how realistic this number might be.

Always work in todays numbers, yes amounts go up but so do wages and costs, when I started work £12000pa was considered a good wage and I earned £400 pm or £4800pa. It's better to work in todays numbers for that reason.

2) I'm currently enroled in my workplace pension (WP). I salary sacrifice (I think, I'll have to check) 5% and my employer contributes 3%. According to PensionBee's calculator, with compounding interest and State Pension, the pot would be around £154,000. It won't even last 10 years. Sweet. I could double my contribution, sure, I could even triple it, but even then, at £360,000 it'll only last 20 years. That level of contribution would start to have an impact on everyday life, with the cost of living and all. This is even without a 25% TFLS. I'm not convinced that the SP will be a thing by the time I reach retirement, so that figure will be even lower still. I could 5x my contribution and end up with a half a million pot that lasts past my 100th birthday, but then I won't have a great quality of life in the mean time, and probably not even at retirement with the state my body will be in. It just seems bleak. Is the workplace pension worth hitting hard? Then there's the "how do I buy a house" thing...

Yes workplace pensions are good to pay in to, don't underestimate the value of the employer 3%, if you opt out you are effectively giving yourself a 3% pay cut. The amounts may seem small but they grow over time- my wife made total contributions of around 5k to a Pension Scheme in her early 20s, stopped and forgot about it. Roll on 30 years this has grown to a massive 89k that she can access for retirement, now she has tracked it down!

3) At 32, I feel like it could be too late to purchase a property. I'm not sure how I could get a good enough deposit together to buy a house. Rates are high, prices are even higher, but I could make it happen for the right house. Thing is, with the deposit, mortgage and other ongoing costs, it'd probably have to be my sole focus financially. A proper pension would probably suffer. With a tiny pension as a result of the costs of owning a property, I'd have to use the property itself as a pension - sell it, cash in and live off that money. Is this an option? That makes me think, what's the point in it all in the first place? I could probably suffer it though, if I could build a sizeable pension on the side, but I really do doubt it's doable.

Look at the bigger picture, it is not all Pension or Savings or House. It is chipping away at all three, some spend their highest earning years paying down the mortgage and then move onto pension saving. It is better to do both in moderation rather than all the effort on one thing. Think of the bigger picture- I suggest you want both a decent pension and a house with some savings? Yes selling and down sizing is an option for some but also remember we're human, you also have a wife so there may be a degree of emotional attachment to your hard won bricks!

4) I honestly believe I'm going to have to retire early due to health. My back is already causing significant issues in life and I don't think it'll ever get better. I don't like the idea of having to live off benefits if that time comes, so I'd like to have something on the side that's accessible immediately - something like a cash ISA. Top of my head, I could pour spare money into a S&S ISA to try and force some growth, then nearer the time transfer it to a normal cash ISA to protect it from losses. As I understand it, it's a savings account, the money that's been paid into it has already been taxed, and anything and everything that is withdrawn from that account would be tax free. I could draw on that essentially at any age. I feel like this might be the most suitable contingency for forced early retirement?

You, yourself answered this- you can move to a different role in your field or get additional qualifications and move to another career, only you can do this and you are looking too negatively at things, we can plan for setbacks and problems but we cannot tie ourselves up thinking everything will go wrong or we freeze and do nothing.

You recognise the back issue, you have done something about it, do a bit more- see GP ask for referral to physio, explain you don't want the problem to worsen and it is stopping you taking up exercise because of fear of further injury!

Don't sit frozen worrying be proactive, it's your life, your back, your happiness!

Sorry if this is a little hard to read and understand, I just wanted to get my thoughts out and get a dialogue going. To start to actively plan and do something about my retirement before it's too late. My thoughts come out best when I'm in conversation and others are asking me questions. I just need some help. I've always needed help.

Just a last note, I've signed up to PensionBee to trace those small WP pensions from previous employers and put them into one place. I'm hoping this small pot will be a useful tool to help me learn a bit more about pensions as a whole, investing the money in the right way etc. Thank you so much for taking the time to suffer reading this.

Others have made suggestions LISA very good dual purpose possibilities for you, debts you're on track to clear by end of 2025- well done this will allow money to be diverted to savings either short or long term. Pension- definitely increase your percentage contributions if not before end of year then at the end of the year. Savings for other things, put money away monthly, x amount for emergency fund, x amount for holidays, x amount for replacement of household things etc. These pots soon add up and even if they don't cover the full cost of things in the early days they go a good way towards the cost of them.

Also remember retirement is a joint adventure so do include your wife's pension provision in your planning and the State Pension, it will be there in one form or another.

We have to work in the rules as they are and not anticipate changes until they happen. Pension providers are currently working with a backlog of people my age that have taken or are taking their 25% tax free lump sum because of rumours that it would be abolished in the last budget!

Good luck on your journey and well done for starting it- look at the bigger picture not laser focus on one aspect of it, you need to allow yourself some credit for even looking at it all.

BrotherUuurgh

@crv1963 - Thank you for your support. I've read your reply a few times over today, and I feel like it might be planting an idea (for lack of a better phrase). I can be very negative, I have been for most of my life, it wasn't the most enjoyable journey up to a couple years ago. It's going to take some "brain training" to try to see things in a different light, but my brother has done this and overcome all sorts, so I'm sure I can too. Thanks again, I appreciate it.

Looking at numbers in today's value will certainly help to keep it simple. I reckon I might revert back to old ways if I knew I had to achieve a £2m+ pot in order to live at the same level of comfort and quality as today! 

Speaking of pots, I've been listening to some very interesting podcasts. I'm trying to dedicate a bit more time to learning about the bigger financial picture and how I can start to make it work for me rather than against me, and the best way is to listen to podcasts or the equivalent. I spend a lot of time in the van driving from site to site so it's the perfect opportunity. Anyway, one thing I didn't realise was that employers, as part of the legal minimum, can actually omit a portion of your wages from their contributions. They'll ignore something like the first £6k and anything above £50ish-k. I haven't got my welcome pack or account details yet for my WP, but I dare say my employer could be doing this, considering they pay 3% and that's that (I did ask if there were any conditions where they could increase their contribution). If that's the case, they won't even be contributing £1k to my pot over the year. Now, I'm not considering opting out - that ship has sailed, I realise the error of my ways - but I'm thinking this sells a LISA even more to me now. If I had a LISA I would commit to maxing the annual allowance and so overall, with this and employer contributions, I'd be getting an extra ~£2k "free" per year which is decent. That'd be on top of my own ~£6k deposits/contributions. £8k/yr doesn't feel too bad. I'm sure I could increase my WP contributions so I think I'd be able to hit that £10k/yr mark this way. 

Does this sound about right, and is there anything I might be missing? I wonder if a S&S LISA would be more suitable than cash?

Thank you so much to everyone for talking to me It could just be because it's friday evening and the end of a near 60hr week, but I do feel slightly... less worse.

crv1963

BrotherUuurgh- Looking at todays value is the best way! Now I re-read some of the thread and you are looking at 30k pa pension? So break it down a little- is that 30k for you alone or 30k for your and your wife as a couple?

There's two ways of looking at it-

1) 30k needed 12k State Pension means 18k needed from a Pension Pot, so at 4% withdrawal rate need a pot of roughly £450k, putting 10k pa away for 36 years is £360k pot plus growth= you can do this!!!

2) 30k needed, 2x 12k State Pension means 6k needed from a Pension Pot, so at 4% withdrawal rate need a pot of roughly £150k, putting 10k pa away for 36 years is £360k pot plus growth= you've smashed this one!

So please consider your wife's pension(s) in your calculations too. Lisa sounds ideal for you- if you can max it out for some years then it will go a good way towards a house deposit or towards your retirement savings. Is your wife also able to open a LISA? If so and if this can also be maxed out then you're well on your way to a property.

I would suggest 100% equities for pension saving as a good way out from needing to draw on it, lots of time to recover from any stock market crashes, and if it does crash you are buying more stocks which add to your pot when it recovers. For LISA as you may need to use this for a house deposit I would be more cautious, still a S&S LISA but less risky than 100% equities.

Although the numbers seem daunting at first they soon become easily understood, how I went about our pension planning was to decide the amount of money (in todays figures) that we needed-

1) Basic number- how much we need to live and pay our bills/ food on the table for us 30k pa

2) Comfortable number- as above but able to run a car have a short haul holiday abroad once or twice pa. for us 40k pa

3) Luxury number - as above but with running two cars, and a long haul holiday once a year. for us 50k+ pa

Then we aimed our saving towards point (3) and are on course to land at the top of point (2) and with another couple of years saving into point (3). Also consider when you withdraw your pension money are you going to have roughly an equal income as your wife? You don't want a position where one of you is Higher Rate Taxpayer in retirement and the other is not paying any tax! So we're loading my wife's pension pot now simply because we started our planning some 10/15 years late than you are, time is really on your side.

We include State Pension in our calculations. You also need to think about what age you retire but don't be fixed on this it would be nice to go before SPA but will depend on how much you can save, so really I'm saying get your "number" and your "date" and work back from that, so it gives you an amount you need to save regularly, look at the things available to save to get the most from your money- LISA, ISA, Pension Pot, Rainy Day Fund etc. Chip away slowly and regularly and you may be surprised at what you can do.

LHW99

Also, although your employer may only legally pay 3%, this will probably rise over the next few decades, and there is nothing preventing you adding a bit more yourself, if you have a bit spare after your other savings goals are met each year.

Also, you could contribute to your wife's pension / LISA if she is short of spare sometimes - or vice versa.

Planning as a partnership does work better for retirement funds.

BrotherUuurgh

@crv1963 @LHW99 - I understand recommending to factor in my wife's pension and to attack it together, but it's not something I can do (I don't want to give away too much personal info). I need to treat my retirement planning as if I'll be an individual.

So numbers wise, I would consider £30k/pa (working in today's money like you taught me) to be a very comfortable retirement. I'd like to aim here as it's the middle ground. I could definitely put a lot more away and make it £50k/pa (or whatever is just under higher bracket at the time) but it would start to take away too much from my life/experiences/memories to be made with my wife while I'm at a relatively healthy age. On the other hand, I could live slightly more comfortably now and settle for £20k/pa. I think the middle ground is right for me. So let's work with that, and allow me to make a fool of myself below...

I'm going to assume my WP pension remains at the current level of contribution - it can't get much worse seeing as it's the legal minimum. My annual contribution would be in the region of £1,800. Employer's share would be about £885 based off my basic wage minus £6k, for a total of let's say £2,660/yr. My retirement age is currently 68 so 36 more years of contributions makes approx £95k. Next is the LISA. I won't open one of these until around late '25 or early '26 as I'm still paying down debt, but once I do, I will contribute the full amount to get the full bonus so this will be worth £5k/yr. I can only pay into this until 50 so 17 years makes the LISA contributions £85k. Total pot so far is £180k. With some growth, I don't know if this would be foolish to think, but could it effectively double over 36 years? Let's say it does. £360k at £30k/yr will last 12 years. With £12k state pension I'd only be drawing £18k so my pot then lasts 20 years. That's a little better. 

The bit that scares me is that if I then consider I need (want) that "early retirement fund" and need a pot of money to take me from, say, 55 to 68, I need 13 years of money. That's another £390k I need to find in 23 years which is about £17k saving a year (less if I consider growth and interest, but still, I'd need to find, what, another £1k/month?). Planning around the worst case scenario, I'm looking at putting away £1,500/month. I'm not sure how sustainable that is.

Thoughts:
Having thought a bit more about the above and actually putting those thoughts onto paper, as it were, it feels a little better. I can at least secure a relatively comfortable future whilst living a relatively comfortable life in the mean time. There will be wiggle room, overtime, ups and downs but at the very least I could live quite well in retirement. I think writing this here has helped me realise that actually, maybe, all I need to do is focus on the WP and a LISA, have it invested effectively and it'll take care of me. That really then just leaves me to plan for that accessible-at-any-time pot of money, which I guess will just be a nicely managed S&S ISA. I understand that over a long period of time left to grow, these monthly deposits will turn the final pot into something much larger, so perhaps the monthly contributions wouldn't have to be so "high". Using a compounding interest calculator shows I could build a pretty good accessible pot with just a little more saving each month, which I don't think would come too much at the detriment of current lifestyle.

Thank you all so much for helping me to think about things and talk. I said at the start I'm not very good at articulating my thoughts or really making sense of what's going around my head, but the last few posts have been very valuable. Thanks again

crv1963

BrotherUuurgh It is all about balancing, you're young (regardless of how you feel about being 32 years old), you have time on your side and you've started thinking about retirement now, so can save smaller regular sums annually than if you started at 42 years or 52 years old. Time and compounding do the lifting for you.

My sons are 28 and 29 my advice to them has been join the employer pension, never opt out. Contribute the maximum to get the maximum employer contributions- works for my youngest his employer matches to 10%, oldest's employer will only contribute what the Govt dictates so 3%. Then choose a 100% equity fund, ignore rises and falls until around 10 years before they plan on retiring and revisit fund choice then. Then look to create an Emergency Fund to cover unexpected expenses, save in a LISA and/or ISA. In your case LISA makes most sense in theirs it doesn't as they bought a place together so can't use their LISA for a property.

If working in the Aviation Industry is your dream do something about moving to that sector be that additional qualifications/ training etc. 

You are doing well simply by looking at all of this, you have a target for debt reduction and have an idea of where you want to go in your work and financial life, you're way ahead of many your age!

Enjoy life today while knowing you've got plans in place for tomorrow.