Paying the most I can into a pension - daft idea?

CaptainWales

I am in my 40's and currently pay most of my salary into my pension. My thinking is that it will then have the greatest amount of time to grow. I don't know anybody else who does this though and wondering if I'm missing something and it's not a good idea?

NoMore

Most people don’t do this because they need their salary to live on and pay bills etc. Do you have extra savings outside of your salary to allow you to do this?

Or are you saying you save most of your excess salary after living costs and emergency fund etc. in pension? Which can be a good idea and probably not that uncommon within this forums regulars. 

Marcon

CaptainWales said:

I am in my 40's and currently pay most of my salary into my pension. My thinking is that it will then have the greatest amount of time to grow. I don't know anybody else who does this though and wondering if I'm missing something and it's not a good idea?

If you can afford to do so, and have sufficient funds to cope if your financial situation changes in the short term (eg if you lose your job and can't immediately find another), and want to save longer term for the future, then it makes good sense. Just remember you won't be able to access the savings until you are at least 57, unless you become so ill you are unlikely to work again.

Smudgeismydog

I salary sacrificed as much as could afford into my pension through my forties. 

Depends when you want to retire, but don’t forget the period until you can access your DC arrangement if you are planning to go before then 

CaptainWales

Thanks. My living costs are low and I have decent savings, which is why at the moment I put most of my salary into a pension. 

MallyGirl

CaptainWales said:

Thanks. My living costs are low and I have decent savings, which is why at the moment I put most of my salary into a pension. 

In that case it sounds like a great plan. You will be used to living on less and will have a decent pension behind you so you will have options e.g. early retirement if that floats your boat.

leosayer

Overall, I put something like a third of my salary into my pension from my mid 40s to mid 50s. I'm now 55 and retired. 

I think there's a few questions you need to ask yourself:

- What tax rate am I avoiding by making these pensions contributions and what tax rate do I expect to pay in retirement? Is the tax saving worth it for having the money tied up for over a decade?

- What big expenses could come up between now and when I start drawing from the pension (age 57?) 

- How much annual income do I actually need for retirement?

- What investments should I use to provide the annual income that I need in retirement?

DE_612183

CaptainWales said:

Thanks. My living costs are low and I have decent savings, which is why at the moment I put most of my salary into a pension. 

Of course if your living costs are low and you have savings - why do you need a pension?

CaptainWales

DE_612183 said:

CaptainWales said:

Thanks. My living costs are low and I have decent savings, which is why at the moment I put most of my salary into a pension. 

Of course if your living costs are low and you have savings - why do you need a pension?

For the tax benefits?

Exodi

CaptainWales said:

I am in my 40's and currently pay most of my salary into my pension. My thinking is that it will then have the greatest amount of time to grow. I don't know anybody else who does this though and wondering if I'm missing something and it's not a good idea?

This comes across as a bit tone deaf to be honest.

Reminds me of that video of the young girl confused why homeless people don't just buy houses to live in.

I expect most people realise the longer money is saved/invested, the more it is likely to grow, however a lot of people in their 30's/40's will be simultaneously grappling with things like mortgages, children, etc.

Of course we could all probably contribute a little more to our pensions, but wildly unrealistic to expect the average younger household to be able to 'pay most of [their] salary into [their] pension'.

Also on a separate note, you must remember life is for living. Don't be one of these people who spends their 'best years' doing nothing but saving, and then is either too decrepit to do the things they wished they'd done when they were younger or has trouble pivoting to 'spend' mode in old age (a very common problem).

stuhse

Also on a separate note, you must remember life is for living. Don't be one of these people who spends their 'best years' doing nothing but save, and then either is too decrepit to do the things they wished they'd done when they were younger or has trouble pivoting to 'spend' mode in old age (very common problem).

Or indeed is dead.  My mum and Dad worked hard and saved hard only to die at 49 and 61 respectively.  My advice is to enjoy some of your money having good experiences now. There is no point in being the richest man in the graveyard.  (or indeed looking down from heaven to see some one else living there best life with your hard earned cash)