Is you salary / house out performed by your pension.

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  • pensionpawn
    pensionpawn Posts: 946 Forumite
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    Paul_Herring wrote: »
    But isn't 'salary' considered the number before taxes are taken off? Hardly comparing apples with Malus pumila if you're doing that... ;)

    I think I mentioned salary after taxes though before voluntary deductions....


    I get the impression that a career in Public Health beckons; they abuse numbers regularly in ways worse than this :rotfl:



    The problem with that particular way of thinking is that 'investing in bricks and mortar' generally refers to buildings that specifically are not your main residence, since you can generally sell those buildings to raise funds for your retirement. Selling your own home, unless downsizing (which tends to not raise as much as thought initially,) or selling to subsequently rent, tends not to be an option.

    Yes, I appreciate that you can't use the value of your home as your pension and that people buy second homes for that purpose. However for those of us with just one home I think it offers a reasonable perspective.
  • lisyloo
    lisyloo Posts: 29,615 Forumite
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    pensionpawn wrote: »
    Yes, I appreciate that you can't use the value of your home as your pension and that people buy second homes for that purpose. However for those of us with just one home I think it offers a reasonable perspective.

    How does it offer a reasonable perspective?
    It could be 0% equity or 100%.

    Many of my contemporaries don’t expect or want to live in the same “family” home when they are retired.

    If you are using it as an indicator of wealth I think it’s a very blunt tool.

    I have a 21 year old banger for my car but a decent pension fund. Appearances can be deceptive and the same applies to the property someone lives in.
  • lisyloo
    lisyloo Posts: 29,615 Forumite
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    Btw - I halved the main residence value as it’s jointly owned, but taking your poll literally its the value regardless.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Terron wrote: »
    I wouldn't call it a consenus. Some research was done in the US which came up with the result that if you rake 4% initially then increase it by inflation each year then based on historical records there is a low (5%) chance of running out of funds in less than 30 years.
    4% works as a starting point and rule of thumb, but there have been lots of challenges.
    For the UK 3.5% might be a better figure, but on the other hand the state pension can reduce the amount you need.

    What intrigues me is that in the study US Treasuries (equivalent to Gilts) offered over 4% yield at the time. There's nothing comparable to substitute this with currently. Only time is going to tell what the sustainable drawndown rate is for this era. Instinct says that there's going to be some disappointed people. As to obtain the yield required more risk is going to have to be taken. Level of risk provides no guarantee or certainty of an overall increased return. Investors such as Buffett made their money by taking a risk of investing in a highly concentrated portfolio of stocks. Conviction investing requires nerves of steel.
  • Ganga
    Ganga Posts: 4,158 Forumite
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    Cat_House wrote: »
    Interesting question. We are just recently retired. Our current house is worth around 300k, our pension between us is 550k but... yesterday our house that we sold for 76k approximately 22 years ago went on the market for 500k. So a bit gutted. We moved half an hour up the M1, 17 years ago and then another half an hour up the M1 for my job 5 years ago for a same price property. I wish we had stayed where we were back then...

    But how much was your current house worth 22 years ago? a lot less than £300k i am sure:rotfl:
    ITS NOT EASY TO GET EVERYTHING WRONG ,I HAVE TO WORK HARD TO DO IT!
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    Thrugelmir wrote: »
    What intrigues me is that in the study US Treasuries (equivalent to Gilts) offered over 4% yield at the time. There's nothing comparable to substitute this with currently. Only time is going to tell what the sustainable drawndown rate is for this era. Instinct says that there's going to be some disappointed people. As to obtain the yield required more risk is going to have to be taken. Level of risk provides no guarantee or certainty of an overall increased return. Investors such as Buffett made their money by taking a risk of investing in a highly concentrated portfolio of stocks. Conviction investing requires nerves of steel.

    The studies (Trinity etc) used US data back to the 1920s and did include the bond bull market in the last bit of the 20th century. Some planners now use historical market statistics for the variation of returns, ie the higher order statistical moments, but more recent numbers like the interest rate of the 10 Year T-bill for returns.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • lisyloo
    lisyloo Posts: 29,615 Forumite
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    Thrugelmir wrote: »
    What intrigues me is that in the study US Treasuries (equivalent to Gilts) offered over 4% yield at the time. There's nothing comparable to substitute this with currently. Only time is going to tell what the sustainable drawndown rate is for this era. Instinct says that there's going to be some disappointed people. As to obtain the yield required more risk is going to have to be taken. Level of risk provides no guarantee or certainty of an overall increased return. Investors such as Buffett made their money by taking a risk of investing in a highly concentrated portfolio of stocks. Conviction investing requires nerves of steel.

    What strategy would you suggest to mitigate
    I can only think of

    Larger pot
    Other investments as well e.g. isas, downsizing
    Using annuity for basic income
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    edited 17 February 2019 at 7:10PM
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    lisyloo wrote: »
    What strategy would you suggest to mitigate
    I can only think of

    Larger pot
    Other investments as well e.g. isas, downsizing
    Using annuity for basic income

    Those are good thoughts.
    There was a time when managing your own money in the stock market to provide retirement income would have been seen as foolish and the default would have been a DB pension or annuity. But with the falling contribution of employers towards retirement provision the employee has been force to take on far more risk and of course the financial industry is there to help them do that for a fee. There will be horror stories in the next decades of people with too little, or losing capital in the markets and not being able to fund their retirement.

    My plan provides and stable income floor (much in line with your suggestions) from a DB pension, state pensions and rental income. I can live on that and any investments in DC pensions or other accounts are used to supplement income or to provide an inheritance.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • lisyloo
    lisyloo Posts: 29,615 Forumite
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    I’ve rarely had a chance to have a dB pension.
    Oddly enough the one time I did have the chance I was advised to take the other option, but as I wasn’t there long it wouldn’t have made much difference.
    So dB pensions are a thing of the past for many.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    lisyloo wrote: »
    I’ve rarely had a chance to have a dB pension.
    Oddly enough the one time I did have the chance I was advised to take the other option, but as I wasn’t there long it wouldn’t have made much difference.
    So dB pensions are a thing of the past for many.

    The growing rarity of DB pensions is true enough, but annuities still exist and they will become increasingly popular if interest rates increase. I believe that more people should be doing some partial annuitization to provide an guaranteed income floor rather than just setting sail on the uncertain ocean of world markets. When I had the chance to convert my DC pension at my final employer to the DB option because of a strange one off change in state law, I gladly took it. I'm now happy that I don't have to worry about the ups and downs of the markets and can stay aggressively invested without worrying about losses affecting my income.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
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