Is this the BIGGEST retirement mistake?
ฝัง
- เผยแพร่เมื่อ 22 ก.ค. 2024
- Retirement is complicated, and everyone wants to find the RIGHT way to organise their finances for a successful (and hopefully) LONG retirement. But I think it’s a big mistake to think that there is one RIGHT or BEST way of doing anything, even though that’s a mistake I’ve made myself.
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Chapters:
00:00 Welcome
00:25 Intro
01:37 Pros and cons of guaranteed income
02:59 Pros and cons of drawing from capital
03:31 Half-way house - dividend investing?
04:10 The biggest factor
05:25 Further thought needed!
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Since retiring bought a motorhome, joined a choir, learning to play a piano and do 4 keep fit classes a week and plenty of time to cook healty food. Lost 4 stone so far and absolutely loving life. Don't delay retirement if you can.
Sounds great, 2 years for me and I'm getting out at 55
@@clivedavo Jeremy Hunt wants 300k people over the age of 50 to get off the golf course and pay him some taxes! Don’t let him down…😂🎉
If the pensions caps were lifted for SIPP’s (not DB schemes aka Public sector) it would unleash a lot of extra money into Investments (SIPP) and be a real encouragement to carry on working. Capping the £1m pension pot limit is a stupid, anti growth move and Hunt’s own goal in extending this is just crass stupidity. Treasury love to tax pensions - its shooting fish in a barrel. Also, having it on absolute value not £1m of contributions, punishes successful investors vs the DB hoards. Once protection of £1m taken you get punished by HMRC if you carry on working and getting any further pension payments. So easily fixable but Treasury need to keep spanking the very few still contributing tax payments to counter balance the majority of UK who are on some form of benefits.
@@TheBard2406 I couldn’t agree more. But ultimately this is what the treasury wants to create more tax money not just from income tax but also from hitting the pension pot limit and tax is that way further. At the end of the day we work to live not live to pay taxes!
Which piano are you leaning to play?
Retirement - the best career-move you'll ever make!
I can't wait😊
@@RobGuile Me neither!
I agree with that!
Best decision I ever made
10 weeks to go - I can’t wait to start it 😂
Hi All, I’m a practising IFA from the midlands who works from home, working from home means i don’t have the interaction with colleagues on a daily basis and can be a little lonely. I dont mind admitting that I watch everything Pete puts on the channel as a reminder of how to do things the right way and gives me a balanced view and approach with my own clients. Keep up the good work Pete (The Guru).
A diverse and balanced number of income streams in retirement is IMO the way to go. Drawdown is great for me as I enjoy the roller coaster ride of a high risk SIPP fund portfolio, but in stock market downturns you don't want to be depleting the capital of the pension fund so other sources of income step up to the plate during these periods. Also, as a previous business owner I am used to having a very variable income and thus well versed at moderating my expenditure when require. A very useful life skill.
Looking forward to this. Excellent as ever thanks
Good food for thought Pete, looking forward to hear how the retirement planning pans out. Thanks for all your helpful advice 👍
Very timely. I await with bated breath for the next instalment. Thank you.
Also Happy New Year to you and Roger and families
Great videos Pete! I’m fortunate enough to be retiring next March - and you cover so many of the thoughts and topics I find myself mulling over as the date closes in.
There are sooooo many factors to consider and soooo much advice out there it can get a bit overwhelming.
Your absolutely right that no one person is the same - and tailoring your pension around your needs is super important - I’m comforted that much of what you are discussing is very much along the lines of my approach so far - looking forward to a long and happy retirement!! 👍
Great news that another book is in the pipeline, loved the first one. Keep up the good work. 👍
Great vid Pete and quite a prescient topic for me 😉😉👍🏻👍🏻.
I’ll be tuning in to future vids with the aim of incorporating any gems into my own retirement plans which are currently being developed and stress tested to avoid cash depletion.
All me best for 2023 mate - let’s make it a good ‘un !!!
Catch you in the next one…..
Nice one as always!
Evening and happier new year to you!
And to you, Mark - thank you!
"Pre-thinking" is why I came here and I found it in spades. Thank you Pete. First video I've watched, subscribed. Looking forward to the follow up videos to this one.
Welcome aboard! Great to have you with us!
OMG! I love Pete sometimes. This promised content is exactly what I need. I have all of the components (Some DB, some forced annuity purchase, some DC pot, some equity ISA, some cash ISA, some emergency fund). These have been ( a little randomly) grown during work. But now I need to reposition the funds to start taking income from them and I admit to being slightly lost. I did have a vague plan involving the 3 bucket approach and diversified index funds, but the recent market turmoil has made me question this yet again 😂
Love you too, Mortelski. Watch this space...
My current spread of investments are very similar to yours at current age (44). While still a way off I am like you unsure about how to consolidate and convert into an income for an earlier retirement or in support of retirement, if you know what i mean!
Great job Pete quality production
Look forward to more news about the book!
Great insight Pete. I am managing our retirement planning in this way, but I'm looking forward to some extra tips from you in the future episodes. Just like Mortelski we have SIPPs, ISAs, a DB, potential inheritance and IHT planning for our children and my wife is still working. Many thanks. M
The only financial advice ever dished out by a retired bank manager friend. "Eggs in Baskets".
Interesting stuff as ever Pete, thanks. With interest & gilt rates on the rise.. the prospect of guaranteed income products in the uk looks like a return to the market. They were lined up for major expansion in 2008 as I remember and then the Gfc killed them off… cycles…!
Hi Pete, love both the channel and the podcast great work, my employer has recently opened up a Sharesave scheme and also a share incentive plan, I was wondering which would be better to invest in?
I was given the advice, before thinking about the financial options to retirement, first think about what kind of retirement you want, ie are you planning to move house soon after retirement, or are you planning much travel and will this be expensive travel, are you planning to leave inheritance to your kids etc etc. Then match your financial options if you can.
Great video as ever Pete, is that an Apple Watch Ultra there, how are you finding it?!
Love your channel.
Whats the norm in regards to drawing down capital from your critical mass for income; tale out whole year cost of living requirement or quarterly, monthly? Stocks had a 1 year down move, so it would of worked out well for those retired taking out a whole years worth in one hit
Good to hear an adviser advocating a mix and change approach for investing. For me it's income investment trusts and living off the natural yield with a buffer, worked during the pandemic and is growing. For my kids maybe more growth investing. When the markets are up I enjoy the gains, when it's down I look at my dividend spreadsheet with contentment.
Love this, Steve. Something I'll be exploring...
Good video Pete - so a ETF Dividend fund or stocks separate that have a dividend yield?
I just discovered your interesting channel. It is great to hear someone admitting that they made mistakes. In contrast, a colleague who is weeks away from retirement has spent the last few years coming up with statements like "Only a complete idiot wouldn't take the maximum tax free lump sum" (and I'm talking about a DB pension here).
If you haven't covered it, maybe you could talk about how high inflation could affect advice. Thanks to Gordon Brown there are parts of my DB pension which will only go up 2.5% a year once in payment. The days when the company pensioners were getting bigger rises than the workforce seem to be over for the moment.
I think this is similar to the Peter Thornhill motivated money idea - thinking mostly about cashflow and investing in ETFs and Investment trusts amongst a few other things.
I stopped working for a living 22 years ago. So, I guess one could say I was a FIRE adopter long before I knew what the four-letter acronym stood for. To be honest, back when You Tube was in its infancy, as a do-it-yourselfer, I was very much out there on my own with next to no help freely available. To begin with I struggled to find the 'best-fit' that financially suited me. It's true what they say about Personal Finance - the problem is in the title, the fact that it's personal, there is no one size fits all. It took a while for the penny to drop and for me to realise that the basis of a successful retirement plan is ALL ABOUT CASH FLOW and its orderly control. Peter, keep up the good You Tube work, even though being based in Cornwall might be considered to be somewhat limiting. However, I'm sure you've got plans to get the word out to a wider UK audience in due course.
I find it really difficult to think about just using up capital, so easily spent but not so easily saved 😂 definitely prefer the idea of drawdown/income from investment but need to work out our short medium and long term approach. Basically need to stop working to have time for all this !!!
According to a colleague it is essential to spend it all before you get dementia. I wonder if that is happening to him already 🙂
Hi. I'm 66 in October next year and Im trying to find out " how I get the ball rolling", regarding my state pension please. Love the channel
Hi Geoffrey. The DWP will write to you a few weeks before your birthday - there’s nothing you need to do to initiate this. Just make sure that your NI record is complete. Google ‘state pension forecast’ and login to the gov.uk website to do that. Good luck!
Stopped work in 2021, the best thing I ever did absolutely love life, I'm 66 in December so that's when my state pension kicks in, anyone who works past there retirement age think again ...tommorow isn't guaranteed.your cash will only go to the dinghy mob .. take it and enjoy...don't forget they want you to kick yer cloggs so they don't have to tip up.
The 'it's about you' is the most important bit. Think I'm coming round to accumulation funds for the growth stage but will feel more comfortable swapping to divided funds and just spending the yield, or at least mainly that, during retirement. Unless annuity rates rise dramatically, I wouldn't want to be handing such a large sum over and potentially getting very little back.
It might not be the most effective way to do it, although only a calculator on your death bed will ever be able to confirm it, but it's what will make me sleep the best at night and surely that's all that matters.
Blue, have you had a look at annuities recently? Hargreaves Lansdown and money helper both have good forecast / calculator tools on line. I just ran some numbers for 55 year old male, joint life (50% on second life, 7 years younger), no underlying health conditions, flat rate, month in arrears and it returned 5.55%, repaying the whole ticket price in 18 years. Even a 3% index linked annuity on the same terms came out at 3.4%. They're worth considering, maybe not for the whole pot but perhaps for some of it. Personally, I think the guarantee is worth sacrificing a few basis points for, especially after the market joys of 2022.
@@richardbowman8306 Still got a few years before an annuity is an option unfortunately/fortunately, but there must be a point where they make sense if you weren't bothered about legacy e.g. if you take 4% as a SWP rate, an annuity paying at least 4% index linked makes sense for the pensioner, it's only the loss of something that can be passed on.
Depending on annuity rates when I get to that point, it may be something to have some of the pension as guaranteed, as I've not got a DB scheme. Having absolute minimum to survive guaranteed is no bad thing as means you could take a higher risk with the rest.
Again, all about the individual
Would be interested in your opinion on recent pensions performance. recently had statements from my 3 pension and they are all losing so much money. what do i do ?
If your years away from retirement, relax. Pensions rise and fall but keep a close eye on it and compare it to other funds that are available and if required, move them. Don't panic though, remember low fund value means your now buying loads of units in that fund.
Definitely like the idea of buying income producing assets, but compounding the income instead of spending it. I find dividends extremely motivating especially when it tends to increase over time and the jumps accelerate as compounding kicks in. I don’t find growth investing very motivating at all as it fluctuates up and down so frequently. Dividend investing may well be sub optimal but the psychological effect can be very powerful and inspire you to continue with the process for the long term. A good plan you can stick to is better than the best plan which you lose interest in after a few years but as you say, everyone’s situation is different and what motivates us is of course different also. Food for thought indeed. All the best for 2023, Pete
Dividends are irrelevant for your returns but, as you say, it’s just psychology.
If I’ve had an investment plan that I would loose interest in and forget about it, as a passive investor, I would feel blessed 😄
Thank you, TCI - "the psychological effect can be very powerful" - definitely this is true. You've nailed it there, really... HNY to you, too!
Happy new year Pete, looking forward to great content from you again this year. Thanks for your Pod cast really well crafted and informative cheers buddy
Pete you made a few relevant points, but you only briefly touched on two major issues which change the whole retirement investment game! ...Point 1: How long are likely to live, most people have a rough idea through their family history, this will impact the spending of capital. Point 2: Government IHT is a crippling 40% over the £325K nil band, which is bringing huge cohorts of the middle classes and beyond into losing their wealth (affectively it's double taxation, before and after death) ... spending your wealth in a timely way and leaving a legacy is an art form unique to every person. Most people get it wrong! ... one notable exception was the famous actor Richard Burton who's estate was valued after probate to be worth just 37 pence!
See this week’s video, TP!
Great video! I would be grateful if you could advise what's best for me..37 year old.. started pension contributions age 27, currently 45k pension pot. I earn 38k and i sacrifice 18% monthly from my salary into my employers pension scheme ( the biggest i am allowed) they pay 5% only. Am i doing the right thing? Or shall i decrease my contributions to 5% or 10% and invest the remaining in a SiPP or stocks ans share isa or lisa? So confused here😮
Really sorry but I can’t advise here. I wouldn’t overthink the balance between pension and ISA. I think it’s great to build up money in both as it gives you options in retirement, but the tax relief of pensions always wins in the long term. Sounds like you’re doing lots of things right - keep going!
Dividend income can be very attractive. Even after the recent rises in capital values my simple dividend investments produced (last year) 4.6% of today's market value.
Not too shabby, Craig.
@@MeaningfulMoney I was quite surprised when I worked it out. And most of it in ISAs too, so quite tasty.
No such thing as a free lunch. Those dividends, the of which you have no control over, are simply removed from the share value. Not ideal for tax planning.
@@davebeef2001 The FTSE has been a reliable dividend producer for a century. In the UK, in an ISA, dividends aren't too badly taxed
You mention dividend investing. Aren't the benefits of dividend investing vs total return investing illusory (although dividend investing has psychological attractions)? Could be an interesting topic for a future video
I’d be interested to know what you mean by illusory?
@MeaningfulMoney I mean it's an illusion that investing for dividends is superior to investing for total return. Whether a company chooses to return some of its money as dividends or retains it all is immaterial to our wealth. Indeed, a dividend is paid and taxed at a time of the company's choosing, but a sale of shares is at a time of our convenience, which can be optimised
In a way yes, two companies that are equally successful with one paying dividends and one not. If all dividends are re-invested then the performance should in theory be the same, minus taxes of course. However, if say the share price is £100k per share and you have 5 shares and you need an income the one paying the dividend is the better choice, unless you need £100k in one go. Also depending where you live dividends can be taxed more favourably than capital gains (from selling your shares for income).
I am hoping to retire in about 5 years and it's great to listen to Pete as he's excellent at putting it in a logical way. Yes it's cashflow, not income and yes there is no best way (DB or DC) it's simply a combination of both (although I could not help thinking we are the last generation to have those options). All in all it's good to have a useful perspective that Pete provides. Other FAs on here appear to want to convince you to think their way whereas Pete is all about opening your mind to new ways of thinking. Keep it up mate!
Historically most equity return is dividends. Yes, you can buy Tesla. How's it done recently?
Dividends and capital appreciation
@@lewiswardita9902 The Barclays Equity-Gilt study shows that "capital appreciation" is actually just inflation plus 1%. Of your average 5.1%, 4% is the dividend, i.e. just under 80% of your return.
Hows Tesla done the past 10 years Craig? That's what happens with growth stocks, zoom out for the bigger picture?
Hi Peter I have a private pension of £80,000 and a works pension of £9000 at the moment I am 64 and got 21 months Togo can you please give me some advice 🙏
Sorry, I can’t advise here. Just save as much as you can, while you can.
I think the term guaranteed is misleading. Every defined benefit scheme I’ve looked at is in deficit already so at best people retiring in 10, 20 years or more are going to receive massively reduced incomes than what is currently being promised, if anything at all
Unless you are on the safer side of "pensions apartheid" divide. ☹️ A lot of the public sector DB schemes are funded out of taxation, rather than an accumulated fund. Suspect this is why they are referred to as "gold-plated". Successive governments effectively rendered private DB schemes unaffordable, while strangely retaining the full advantages of their own. 😉
Is the title misleading? I'm not sure what the big mistake is he is referring too
I mention it several times in the video! The mistake is to choose just one cash flow option when there are many, and when the option you choose may not be best suited for you…
Income from property or rental income covers all - capital appreciation, income growth, reasonably stable and reliable, leaves a lot to pass on to children and grandchildren
True. assuming you enough of those things to yield enough to live on...
Stock market beats all
@@lewiswardita9902 Individual shares might do (NVDA, TSLA, AAPL, AMZN for example) but not the whole market.
FTSE100 was at 6800 level over 23 years, after recent hikes, it's around 7700 today, roughly 10% rise in over 23 years! How can this beat property?
@@soundslight7754 Because that's not the whole market, it's a bit of the UK one, mainly made up of banks, oil and old companies that pay reasonable yields but have little prospect of growth or increasing their yield, hence dull prices. Do the same calc with the S&P500 or, better still in the very long term with something like the FTSE Global all cap.
As for property, it's not what it was, and is hugely inefficient for tax (whether done privately or through an SPV once you want to get the money back out), plus the added regulation, the risk of a govt deciding you can't increase rents or remove non-paying tenants (hello Scotland), possible EPC improvement requirements and being seen as some sort of pariah by the young, the media and, therefore, most politicians. Unless you're a pension company building your own flats to rent, it's going to be a bad few years to come.
@@hooksforestchin You have some valid and interesting thoughts. thanks for sharing. What do you suggest we do other than all of market? Examples given above beat NASDAQ, S&P500 and DJIA and every other index.
People will need to live somewhere, government and LA aren't going to build in numbers required, so all noise and obstacles will find a workaround and prices adjusted to cater for them. I think tenants will end up pay on the whole and some shoddy landlords will go out of business.
Stop flicking the screen its annoying
Waffle, waffle, waffle....,
Thank you, thank you, thank you....