The "half your age" rule

Moonwolf

https://forums.moneysavingexpert.com/discussion/comment/82173197#Comment_82173197

To be fair, most people underestimate the power of compounding as well.

My advice would always be to just be to save as much as you can afford. This might mean saving more when younger and living at home or early on with fewer responsibilities, then reducing it, and then pushing it back up before retirement.

I specifically put extra in during my 20s expecting to reduce contributions when children came along, partly hoping those investments would grow and partly thinking that the extra costs would be less painful as I would have the “extra” income from reduced pension payments. (Things didn’t turn out as expected but that doesn’t invalidate this plan)

Linton

I suggest you dont rely on any general rule such as half your age, 60/40 equity bond split, and 4% (or 3%) safe withdrawal rate. Make your own decision based on your own circumstances. If you cant, educate yourself or pay for advice.

Exodi

https://forums.moneysavingexpert.com/discussion/comment/82174322#Comment_82174322

Second that, but on the flipside most people also underestimate or don't consider inflation.

It might seem alien to those on this forum, but vast swathes of the population do not consider or even understand it. I know my relatives don't as they've told me as much.

Even on this forum we regularly see people excitedly outputting results from online compounding calculators, gleefully telling us that if they put £1k a month into their pension and the markets return 7% then they'll have over half a million quid in just 20 years!! Fantastic, champagne and cruises, here they come!

Until the party-poopers inform them that if you assume 3% average inflation over those 20 years, it might be worth £360k in real terms - half the return has gone towards maintaining purchase power. Not as exciting.

I think the problem is most people just do not engage much with pensions at all. I was speaking to my MIL just yesterday who said she was planning to retire in the next 4 years - yet didn't even know what type of pension she had… all too common unfortunately. The time to think about pensions is decades in advance so compounding can do the heavy lifting - unfortunately in reality most people think about pensions about 10 minutes before they decide to retire.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/82174433#Comment_82174433

Harsh - but fair….People also rely on the state pension far too much and assume they don't have to make some contribution themselves, thinking the state will see them OK through their dotage. I see the state pension as a bonus and have ignored it for any calculations w.r.t pension contributions etc.

Cobbler_tone

https://forums.moneysavingexpert.com/discussion/comment/82174500#Comment_82174500

I see the state pension as a supplement to my private pension and a vehicle to allow me to retire at 58 instead of 67, giving me a smooth income to the grave. I'm all for diluting the triple lock though.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/82174606#Comment_82174606

That's fine if you take the view that it will remain more or less in its present form until you depart this mortal coil. I am not as optimistic. It will come as no surprise to me that between now and my departure, SP will be means tested and triple lock will go. For sure it is a worst case scenario, but if I plan for not receiving it, then I am not relying on the State for my dotage and thus I can sleep easier.

NoMore

https://forums.moneysavingexpert.com/discussion/comment/82174685#Comment_82174685

Your 61! You will get your SP in 4 or 5 years, very pessimistic thinking. I don't even agree but understand why young people with decades to go, would be so pessimistic on State Pension, but at your age it down right could be harming your Pension Planning by choosing to ignore it.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/82174718#Comment_82174718

It is pessimistic, but something has to give at some point. It may be sooner than many think. Not sure why it would harm my planning? If I ignore it and don't receive it then all is well, if I do receive it - and continue to receive it - then happy days.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82174685#Comment_82174685

That could not happen without decades of forewarning. For most people retiring now SP forms a vital part of their retirement plans and they would have no opportunity to replace it. Apparently it was only in 2014 when more than 50% of the working poipulation became members of a pension scheme. Moving a vast number of people onto a means test system would be an expensive logistic nightmare.

NoMore

https://forums.moneysavingexpert.com/discussion/comment/82174724#Comment_82174724

You could maybe have retired earlier due to not needing as much or take more income now as you know the SP is coming, just ignoring it in total at your age, is insane to me. Up to you though.