Mind the 'age' gap: retirement planning
Comments
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Is 5% is realistic (after adjusting for inflation)?
Hard to answer with any degree of certainty - personally I don't think so - but then I'm fairly conservative by nature in all this - so that's just my opinion. Others will likely disagree. I'd be using a much lower figure - probably around 1-2%, but I'd also be using a range of figures to view different potential outcomes.0 -
Noobie2011 wrote: »So I am not sure how conservative you should be with compound interest but it seems everyone goes off 5%. However when I apply that to our pension pots they increase quite a bit and give us quite a few more options. Is 5% realistic to calculate off or is the rule to apply a less risky %
I've been looking at 3% for safety. I like being conservative as I may not have that much wiggle room to make up a shortfall if I plan for greater growth and it doesn't happen.0 -
Is 5% is realistic (after adjusting for inflation)?
Hard to answer with any degree of certainty - personally I don't think so - but then I'm fairly conservative by nature in all this - so that's just my opinion. Others will likely disagree. I'd be using a much lower figure - probably around 1-2%, but I'd also be using a range of figures to view different potential outcomes.
Yes it seems a lot calculate on 5% but I think I am going to be more inclined to use 3%. To be honest I could just easily create different scenarios ranging from 1-5% and then also apply varying different ages of retirement.0 -
Cottage_Economy wrote: »I've been looking at 3% for safety. I like being conservative as I may not have that much wiggle room to make up a shortfall if I plan for greater growth and it doesn't happen.
I think I am on the same page as you with being conservative as I think those figures will still work very well so if ends up being lower I have good wiggle room or if ends up higher then all good.
Also as we will have extra disposable soon to also invest on top of mortgage overpayments I am probably going to use that money to go a bit riskier or use as an emergency pile if interest rates do not go as I wanted.
Also not sure if correct but I am also only applying a 1% increase per year on our house value which I am hoping is a very conservative view as more chance of being better in the 15 years we are looking to pay our mortgage off and potential downsize in order to buy abroad and have 2 bases0 -
Noobie2011 wrote: »I think I am on the same page as you with being conservative as I think those figures will still work very well so if ends up being lower I have good wiggle room or if ends up higher then all good.
Also as we will have extra disposable soon to also invest on top of mortgage overpayments I am probably going to use that money to go a bit riskier or use as an emergency pile if interest rates do not go as I wanted.
Also not sure if correct but I am also only applying a 1% increase per year on our house value which I am hoping is a very conservative view as more chance of being better in the 15 years we are looking to pay our mortgage off and potential downsize in order to buy abroad and have 2 bases
That's probably wise. Ours is about 3-4% during a 'normal' year but doesn't take account of bad years. When I do a worst case scenario calculation and include downsizing I'll probably drop that 3% down.0 -
How is everyone including the death of the older spouse in their planning?
Do you plug in some 'ages' (70/75/80 etc) then take a look and see what would happen with the money or do you go on life expectancy tables? The former means I have to include several different plans for that one scenario.
How are you doing it?0 -
I think you have little option other than to do the former - life expectancy tables are of no help in individual cases - it's simply another unknown variable that you need to plan for.
PS - don't want it sound like I'm reducing the importance of your DH to an unkown variable....but on a spreadsheet....well hopefully you know what I mean.0 -
Cottage_Economy wrote: »How is everyone including the death of the older spouse in their planning?
Do you plug in some 'ages' (70/75/80 etc) then take a look and see what would happen with the money or do you go on life expectancy tables? The former means I have to include several different plans for that one scenario.
How are you doing it?
I have not even looked at this at all as it is one of those things where we are basing our figures on us having a healthy life and living well past 90. It is one thing we will look at though as any money putside the pensions is fine as can be accessed by either partner if the other one dies. However I still do not understand the rules around how much pension the other one gets if the partner dies as I stupidly thought it was 100% of what is left0 -
PS - don't want it sound like I'm reducing the importance of your DH to an unkown variable....but on a spreadsheet....well hopefully you know what I mean.
:rotfl: I do know what you mean.Noobie2011 wrote: »I have not even looked at this at all as it is one of those things where we are basing our figures on us having a healthy life and living well past 90. It is one thing we will look at though as any money putside the pensions is fine as can be accessed by either partner if the other one dies. However I still do not understand the rules around how much pension the other one gets if the partner dies as I stupidly thought it was 100% of what is left
No, it's horribly complicated and one of the next things I'll have to look into properly when doing the death calculations. You have to take in account whether- a DC or FS/DB pension
- if deceased was an active or deferred member
- the age on death above/below 75.
- Also each scheme provider might have its own criteria.
I've put below what I've figured out so far for ours but I'm pretty sure there are mistakes/misunderstandings here.
For me:
1. 100% of his SIPP
2. 45% of his DB pension if he is receiving it at the time he dies (this might change if we decide to transfer part of his DB pension). If he is not, I get a lump sum four times his annual income plus some of his contributions. I do not know if that is the same for an active or deferred member. I suspect not, as the four times lump sum is a type of life assurance offered by firms when you work for them. I do not know what I would get if he died before drawing the pension and was a deferred member.
For him:
1. 100% of my (planned) SIPP
2. 50% of my DB if I am receiving it at the time I die. If he is not, he gets a lump sum pretty much as laid out above
3. 100% of my DC pension if I am under 75. I think he has to pay tax on it if I am over 75
The deceased's state pension income will be gone.
We also have two life insurance policies, one of which is decreasing term and ends in 2026, and the other increasing term and finishes the same year as the mortgage. So if one of us dies before 2036 there is the money to pay off most, if not all, of the mortgage.0 -
Noobie2011 wrote: »I have not even looked at this at all as it is one of those things where we are basing our figures on us having a healthy life and living well past 90. It is one thing we will look at though as any money putside the pensions is fine as can be accessed by either partner if the other one dies. However I still do not understand the rules around how much pension the other one gets if the partner dies as I stupidly thought it was 100% of what is left
Not pleasant I know, and at times you almost feel like like you are planning when the most convenient time would be for them to pop their clogs
.....but it is something you need to consider, especially if you rely on your partner's pension income and it would take a substantial haircut in the event of their "departure". 0
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