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

n15h

That's fair - I'm focusing on what I think I can try to get the future values of the pension, investments and savings to be. However, I do acknowledge that inflation is 4% and I want to ensure no matter what the final future value is, the growth atleast outpaces inflation in the long run and maintains its buying power.

I do note that my aim/goals are based on what the figures for a moderate and comfortable retirement are as of today, and these are likely to increase in future because of inflation.

El_Torro

Normally people make forecasts assuming today’s money, not including inflation. It’s just easier than assuming an inflation rate and an investment growth rate, rather than just a growth rate after inflation.

You mention that you have a GIA, and don’t mention moving some of this to your ISA. Why? If you are not currently making full use of your ISA allowance it’s important that you do. 

I like your opening post, it reminds me a bit of my financial situation when I was 37. I am 45 now, so not a million years older than you. One thing to bear in mind is that your 40s is a great time to accelerate your career, your experience until now could get you one or two promotions in the coming years. Of course not everybody wants to be promoted, though with promotions comes more money and more scope to accelerate your investments and retirement plans. 

n15h

kimwp said

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?

That's good bedtime calculations!
I am hopeful to have a retirement income of ~£4K a month before tax.
Yes, the pension will roughly be in the range of £650-£750K. Can I ask how you worked that out?

I chose 10% in bonds as a starting point to slowly reduce my exposure to equities over time as I get closer to retirement. The aim is to possibly have the pension portfolio's equities:bonds ratio of 70:30 or 60:40 at the point I retire. 

kimwp

n15h said:

kimwp said

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?

That's good bedtime calculations!
I am hopeful to have a retirement income of ~£4K a month before tax.
Yes, the pension will roughly be in the range of £650-£750K. Can I ask how you worked that out?

I chose 10% in bonds as a starting point to slowly reduce my exposure to equities over time as I get closer to retirement. The aim is to possibly have the pension portfolio's equities:bonds ratio of 70:30 or 60:40 at the point I retire. 

Hee hee, thanks! I worked out your assumed rate of inflation from your current spend not including mortgage to your planned future spend. Then applied that to your assumed future pension pot. It is a lot easier to work in today's values btw and just take off inflation from your return rates as oriz suggested. 

My thinking is 100% equities plus 2-5? Years cash to tide me over market dips until I pop off this mortal coil (or mental decline necessitates an annuity)

Bostonerimus1

QrizB said:

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.

Out of principle I have always avoided borrowing money...even at 0%. The effort and bad habit of it isn't worth it for the 300 quid a year the OP generates from 8.3k at 4%. 

n15h

El_Torro said:

Normally people make forecasts assuming today’s money, not including inflation. It’s just easier than assuming an inflation rate and an investment growth rate, rather than just a growth rate after inflation.

You mention that you have a GIA, and don’t mention moving some of this to your ISA. Why? If you are not currently making full use of your ISA allowance it’s important that you do. 

I like your opening post, it reminds me a bit of my financial situation when I was 37. I am 45 now, so not a million years older than you. One thing to bear in mind is that your 40s is a great time to accelerate your career, your experience until now could get you one or two promotions in the coming years. Of course not everybody wants to be promoted, though with promotions comes more money and more scope to accelerate your investments and retirement plans. 

Yes, that's my train of thought. I am trying my best to ensure that the rates of growth I am seeing with my pension/investments/savings continue to beat inflation and maintain its buying power. It is all a forecast and an aim, which I know I can't guarantee, but my journey has taught me to have a goal to aim for and try doing everything in my power to get there within my risk appetite.

Yes, I am making full use of my ISA allowance. There is ~£7K in the GIA and I will be moving half in to my ISA in the next 2-3 months. I will keep the rest in my GIA as a fun pot.

You certainly aren't too far from me and I appreciate the counsel. I got a promotion last year with a pay rise and that motivated me to also increase my pension contributions. Certainly any scope to accelerate my plans and also keep down my tax costs are welcome.

kimwp

Bostonerimus1 said:

QrizB said:

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.

Out of principle I have always avoided borrowing money...even at 0%. The effort and bad habit of it isn't worth it for the 300 quid a year the OP generates from 8.3k at 4%. 

I started stoozing with much trepidation last year (having always paid credit cards off in full previously). Wish I'd started earlier - £1.5k for a couple of hours work a year is quite nice. But I never take any risks eg stock market with that borrowed money and always make sure I will have sufficient cash free at the end of the interest period to pay it back in full.

n15h

Bostonerimus1 said:

Out of principle I have always avoided borrowing money...even at 0%. The effort and bad habit of it isn't worth it for the 300 quid a year the OP generates from 8.3k at 4%. 

That's fair, each to their own. For me, the interest has paid for new car brakes and MOT. Every penny counts

However, I ensure I keep it within my control. I don't spend beyond my means and am not increasing my credit card spending or even the credit limit increases that the bank offers.

HedgehogRulez

Aggressive return expectations. I’d plan with 0-1% growth taking into consideration inflation

n15h

kimwp said:

Hee hee, thanks! I worked out your assumed rate of inflation from your current spend not including mortgage to your planned future spend. Then applied that to your assumed future pension pot. It is a lot easier to work in today's values btw and just take off inflation from your return rates as oriz suggested. 

My thinking is 100% equities plus 2-5? Years cash to tide me over market dips until I pop off this mortal coil (or mental decline necessitates an annuity)

Thanks, maths isn't my strong suite but when its explained to me, it makes complete sense. However, got to hate doing maths on a Sunday evening

That's good thinking. My thinking is on a similar line, however with a lower amount in equities (~60-70%) and enough in savings and pension lump sum for 3-4 years for market dips.