37 years old - My current situation and savings/retirement plan

n15h

Hi, I wanted to make this post about the journey I've been on in the last 15 years and how throughout the journey there are many times where I've felt off-track and wondered when will be the day I can see that my saving/retirement planning is beginning to work for me. It is a long thread and is meant to help others who may be in a similar position or to start thinking about planning for short/long term savings and retirement.

Thanks for letting me share this  

About me
37 years old, and am single. Full-time employed in financial services earning £54K gross per year.
Bought my first house in 2019 and currently live in it. Currently have £128K mortgage outstanding with 37 year term remaining. Mortgage is £381/month (due to low 5-year fixed rate that I secured before rates went up in 2022) and I overpay £100/month = £482 per month.
Current net pay is ~£3K per month, and all monthly expenses (bills, mortgage, food, socialising etc.) is ~£2300.

Background and when this journey started

• Graduated from university in 2010, with maybe £1-2K in savings from working weekend jobs as a bartender and a shop floor assistant for about 2 years. Barely scrapping by with my wages, was renting and all my belongings could fit into 1 room.
• Impacts from the financial crisis was still being felt where I was, and I made to choice to get a job just so I could start earning and grow my skills. Started work in a customer services call centre for a financial services company, earning about £10-£12K per year gross.
• Worked shifts in the call centre and also kept my job as a bartender as and when needed. Still continued renting and focused on building my savings, without giving any thought to pensions or retirement planning.
• Built my skills and networks and started in the Risk team in 2013. Pay increased to ~£24K per year gross.
• Started to take more of an interest in saving/investing and future planning, and visiting forums like MSE to start building my knowledge of savings/investing and learn from knowledge shared on here.
• Realised I could opt in to my workplace pension and my employer would also contribute depending on my contributions. I started with small amounts to my pension taking from my monthly gross salary and at the time it was painful to see the reduced net pay I was receiving.
• Over the next 12 years, I've continued working in the Risk team building my skills and knowledge to improve my competencies, my pay package and any bonus. I've now got to the place where that is £54K (exc. any bonus) and am grateful to be in this position.
• The education I've received on saving/investing has also been of tremendous value when I look back at where I was 15 years ago and starting on this journey, and what it currently looks like. I've learnt habits to automate savings which helped build my house deposit, explore my risk appetite and the limits of risk I can go up to, building and holding an emergency fund, trusting my gut instinct, and recognising the signs of scams or FOMO such as pump and dump investment strategies.

What does my current savings and investments look like?

• Total value of all holdings is £126K, made up of £70.1K in investments and £55.9K in savings.
• Utilise the ISA allowance each year. Currently contributing £300/month in a S&S ISA that is invested in a global tracker fund.
• Other investments include a GIA which I use for fun investing - its through this that i learnt some tough past lessons on not always investing into a share just because others say so. I lost c.£5K at least to shares which have collapsed because of FOMO rather than trusting my gut and taking the time to research whether the share is right for my risk appetite and investment style.
• The investments also include a Lifetime ISA (LISA). I aim to maximise this each year to get the maximum government bonus. Currently have £23.7K saved in my LISA and I'm using this as a dividend portfolio. 
• My savings are a mix of ISAs and easy-access savings accounts. I keep my emergency fund of £26K in the easy-access accounts which I shuffle to products every so often that pay as much interest as possible, without locking the money for a period of time.
• I don't have premium bonds for myself at the moment as I prefer the guarantee of receiving interest. However, I know they may be a good choice depending on a person's circumstances and if they want a way to get tax-free returns/prizes.

What does my pension now look like?

• I currently pay 15% of my salary, and my employer pays 12%.
• When I look back and recall those early payments into the pension which hardly looked like they were growing at all - £1 here, £1 there etc.
• The pension was invested in 100% equities, until this year I rebalanced it to align with my risk appetite. It is now 90% equities and 10% bonds. The investments are held in funds provided by the platform.
• A couple of years ago, I moved the investments away from the default lifestyle funds and instead opted for the equity and bond funds separately that were available on the platform.
• In total, so far £100K has been paid into my pension between myself and my employer.
• Pension is currently valued at £169K.

What debts/liabilities do I currently have?

• I have 1 credit card where I owe £8300. This is on a 0% interest rate which I have been paying off slowly over the last 2 years. I regularly transfer the balance to another 0% card when the current deal ends.
• Currently paying £176/month, choosing instead to keep the money in my savings and earn interest on it.
• I am currently invested in my employer's share savings programme which matures in 6 months. I will have ~£10K saved into it, and depending on the share price, I may be able to get a nice return on those savings. I'll use the money from this programme to pay off the credit card.
• Apart from that, the only debt I have is my mortgage. I am currently overpaying £100/month on it, and using these overpayments to bring down the term.

What are my plans for savings/retirement?
When i first started on this journey, I honestly could not envisage where I would be in 10-15 years, what would i be doing, how I would be surviving, what could my bank balance look like. I feel grateful to be in the position I currently find myself in, and hope to keep learning and growing myself and my balances. My current goals/aims are:

• Continue investing into the S&S ISA and the pension and where possible, increase my contributions if I can e.g., If i get a bonus, I always pay a large portion into the pension (its a shame the employer doesn't match bonus payments).
• Retire at age of 58-60 years old.
• I want a comfortable lifestyle which I think would be in the region of £40-£50K per year. My expenses/lifestyle costs are likely to fall by that age
• Pension value to be ~£1.4m. Aiming to then take 25% tax free which is currently capped at £268,275. However, if this was ever increased, then I'd like to take a tax free lump sum of ~£300-£400K and leave £1m in the pension to draw down on.
• Paid off my mortgage hopefully in full either through savings or using the pension lump sum.
• Grow the LISA to hopefully be valued at ~£150-£180K when it matures at age 60. Current dividend return rate is 6%, which could give an income of £9K ( and hopefully more but I do understand dividends are not guaranteed and could be less than this).
• Have savings of ~£300K.
• Use the savings and pension tax free lump sum to fund my lifestyle for a couple of years before I start drawing down on the pension. I'm estimating a 4%-5% drawdown rate would be safe to maintain the pension for at least 20-30 years.
• Currently on track to receive a full state pension, as long as I maintain NI contributions for a further 17 years.

Any changes I would make if I could turn back time?
Looking back, I wish I had started saving into my pension much earlier than I did. I started at age 25, and in hindsight, starting earlier even if the contributions were low may still have helped further the growth of the pension. I find the world of investing fascinating and if employed properly, in my opinion it can help to grow finances. However, it needs both time and patience - both things that I've learnt through this journey, and the earlier the journey is started, the more that time can be used to grow/compound the returns.

What's the one tool I found beneficial?
Automating my savings. I was using the features from Chip which would connect to my bank account and see what could be saved. I didn't have a proper handle on my finances, so it took the guess work out of what I was spending and what I could save. It helped me to save consistently, and this helped to build up my savings for a house deposit. Since then, I've learnt to better manage my finances so I don't need Chip anymore. However, automating it means the money is gone from my current account soon after pay day and into my savings without me thinking about it.

njkmr

A good read that.
I'm no financial expert but it seems like you have certainly got your head screwed on .👍
You will certainly be in a better place than most people will be at retirement age.
Well done.

Bostonerimus1

I would be paying off your mortgage more aggressively with the plan to have it paid off well before retirement. This takes a great deal of pressure off your retirement income generation. 

Why do you have money on a credit card...even at 0% it's bad spending practice to rely on a credit card balance. Pay it off and never have a balance again!

Do you own a car?

FIREDreamer

Bostonerimus1 said:

Why do you have money on a credit card...even at 0% it's bad spending practice to rely on a credit card balance. Pay it off and never have a balance again!

Stoozing I suspect.

QrizB

FIREDreamer said:

Bostonerimus1 said:

Why do you have money on a credit card...even at 0% it's bad spending practice to rely on a credit card balance. Pay it off and never have a balance again!

Stoozing I suspect.

Agreed, sounds a lot like stoozing.

When you can borrow at 0% and save at 4%+, it would be rude not to take their money.

n15h

njkmr said:

A good read that.
I'm no financial expert but it seems like you have certainly got your head screwed on .👍
You will certainly be in a better place than most people will be at retirement age.
Well done.

Thank you. Its taken years to get to this stage and I have no idea of whether I'm doing better or worse than anyone else at my age. I'm sharing my story so anyone can use it, either to compare how they're doing, or to inspire them even if they come from something small or are starting from scratch.

n15h

Bostonerimus1 said:

I would be paying off your mortgage more aggressively with the plan to have it paid off well before retirement. This takes a great deal of pressure off your retirement income generation. 

Why do you have money on a credit card...even at 0% it's bad spending practice to rely on a credit card balance. Pay it off and never have a balance again!

Do you own a car?

I appreciate the feedback. To answer your 3 points:

Mortgage - Its currently 1.65% for another 2 years. So I prefer to put the money into savings/investments earning 3-4% and when the 2 years are up, I can then put the money and extra interest into a large overpayment before re-mortgaging.

Credit card - The credit card was 0% on purchases and i used it for some large purchases. After it ended, I been stoozing as other have said. I felt this was right for my circumstances to earn some interest on the money before it is paid off after receiving the funds from the share savings programme maturity in the next 6 months.

Car - Yes i own my car. I did not buy it with any sort of car financing, PCP etc.

kimwp

A few questions -

Are your retirement numbers in current values and pre or post tax? What real rate of return are you assuming?

n15h

kimwp said:

A few questions -

Are your retirement numbers in current values and pre or post tax? What real rate of return are you assuming?

My retirement numbers are future values pre tax. The rates of return I am assuming is:
- Pension: 7%.
- LISA: 6%
- Other S&S ISA: 5%
- Savings (ISA and non-ISA): 3%


Edit: Error in my reply. I had said the future values are post tax. This is incorrect and they are pre tax

QrizB

^ That seems a touch optimistic, if you're working in real terms. Maybe knock 4% off all of those?

Of course if you're working in nominal terms and also forecasting 4% inflation, it might be more realistic.

kimwp

n15h said:

kimwp said:

A few questions -

Are your retirement numbers in current values and pre or post tax? What real rate of return are you assuming?

My retirement numbers are future values post tax. The rates of return I am assuming is:
- Pension: 7%.
- LISA: 6%
- Other S&S ISA: 5%
- Savings (ISA and non-ISA): 3%

Thank you. Past my bedtime, so I may get this wrong- so you are assuming in 20 years time, you will have a spend of 40-50k, equating to roughly 23k now (based on your monthly spend not including mortgage) - so assuming inflation of 4%. And your pension pot will be roughly £650k in today's money?

May I ask why you have decided to have 10% in bonds?