HOW much you need to save to RETIRE EARLY - Episode 4 Pension Income Planning
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- เผยแพร่เมื่อ 11 ก.ย. 2024
- In this fourth episode of a pension income planning series we look at how much money you need to save into your pension for early retirement and/or to achieve a more comfortable and luxurious retirement
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We use a pension income simulator which provides an indication of whether your drawdown approach is likely to be sustainable or whether you will run out of money - watch and all is revealed.
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Bouncing Back, retirement planning, pension drawdown uk, pension drawdown calculator, how much do i need to retire at 55, how much do you need to retire uk, how much money do you need to retire, how much money do i need to retire, how much money do i need to retire early, how much you need to save to retire comfortably, how much money do i need for a comfortable retirement, how much do i need to save for retirement, how much income can you generate from a £500K pension pot
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If people spent as much commitment on managing their expenses then they'd find that these 'living standard' scenarios are very excessive. Our monthly spend is a fraction of the 'basic' scenario but we have a very nice lifestyle...including (pre COVID) lots of far flung travel using the shared economy. By focusing on our spend we were able to retire at 50...as did my parents and my brother.
These videos just make me realise I am not going to have any where near like the amount I want!
Good health is the key here, and a pension pot over £500K, although a million pounds would not be frowned upon. Nice video.
Thank you
Good vid. Interesting. Surely your younger years you can spend more. In your eighties, you need much less.
I like the comment about million pension pot people “ Lets hope you have the health to enjoy it”. I detected a little menace there! I like your videos very much. I am 60 this year with 960 k in mix of defined benefits and defined contributions. I am now getting quite excited about the prospects when I hit 65. Nice position to be in. When I was thirty I put oodles of money in so I guess I earned it. I keep trying to convert my younger workmates into savers but it simply falls on deaf ears. I turn up to work in a wreck of a car and they have BMWs on loans. So they have the dosh spare. Very frustrating. I dont think they appreciate the impact inflation is going to have and spectre of higher interests for mortgages. Funny thing is they also think I can afford to retire now.
You sound like me, I’m always trying to tell young people to save/invest but they’re too busy having fun and spending everything they earn. I get it though, I was the same…..it was a chance encounter I had with someone when I was in my late 20s that literally changed my life. He was into investing, something I thought was just for rich people - listening to this ordinary bloke talking about stocks, investing and such was fascinating. That’s what got me started - 30 years later, and it was without question, the best financial decision I ever made. If I hadn’t met him, I do think I would have eventually started investing - but it may have been 10 or even 15 years later.
But 30 years ago I assume you were not paying £1200 a month rent or mortgage as they are. So they may have loans and what you perceive to be bad habits but what you may not account for is the levels of disposable cash vs when you were the same age. Factor in childcare and food costs, you just have to accept you were in a lovely bubble in your 30s
What these 20-somethings don't realise is that if they put £300 a month into their pension (which could be £150 of their money pre-tax with employer match, so only ~£110 a month), ~40 years later they would have a similar real-terms pension value as you, give or take a bit of volatility, assuming a mostly equities investment.
I've turned 40 this year and I've always been in one workplace pension or another but I've really started trying to get a handle on things to see where I'm likely to 'land' come retirement age which for me is 68, but who knows, maybe later!
Using my own providers planning tools I'm likely to have a pension pot of £480k so this video has come in handy for seeing how it could pan out in terms of plain numbers. I've also got a small defined contribution scheme from a previous employer but I never really understand how much that is worth or more importantly how to forecast what that may pay in 28 or so years!
Make sure the DC scheme is invested in a more adventurous plan than the default. I presume your main pension is defined benefit and the pot size is just an estimate or the equivalent worth. Make sure your beneficiaries are named on all pensions.
Not sure if I am missing something, but If you have £400,000 in savings, that would pay you £20,000 per year in interest from a high interest bank account at 5%, without needing to dip into the £400,000 savings.
Exactly, youve hit the nail on the head👍
That's the part they never want to discuss.
It's the same for UK dividend blue chip shares. 5% return all day long without touching the original investment.
I've been investing in UK dividend shares for twenty odd years. The best bit is stock markets values move with inflation over time, so there's less inflationary devaluation as there can be with holding cash.
I just buy more shares each year and compound the effect of my dividends.
My gut instinct is that the pension industry is a run to benefit itself. We just end up taking a wage while watching our investment dissappear, instead of living off our investment while its fully invested in the most effective way.
You forgot inflation. This 4% rule assumes you keep upping your payments each year with inflation, so it keeps the same ‘spending power’.
That 5% high street interest in your example would get taxed… and it’s less than inflation at the moment, so you’d actually end up with less money in a year.
You will have to pay tax to HMRC for any savings over £500 a year.
This is really helpful information and very easy to understand.
Glad it was helpful!
Resured at 50 with a 800k pot. Roll on 55 😊
@@thejupiter2 Earth mate. What about you. Would send you a screen shot it that was possibly. Transferred out of a DB pension a few years ago ( 48) the day before the rules changed and it’s risen nicely. My other pension is at 200k 😊
@@thejupiter2 you sound like a very bitter person. You could have just scrolled on by but you felt the need to comment. So I replied
@@thejupiter2 can’t post screen shots but send me your/ an e mail address and I will happily send you the info.
@@thejupiter2 transferred out of my DB pension when I was 48. ( 3 years ago ) All over to my financial advisor, it’s made about 17% a year 🤷♂️. It’s worked for me so far
@@thejupiter2 worked since I was 18 and got enrolled in a final salary pension, that changed in 2011 to an average salary pension so I had 2. Transferred one out and still pay into the average one.
Are there any calculators for early retirement that take into account drawing more before state pension age?
Another great follow up, thanks Helena 😊
You’re welcome 😊
Hi Helena, Interesting video, however can you please give an opinion on the risk of sequence of returns? I have been advised that 3years cash is necessary on hand ALWAYS and never to draw from directly from the "pension pot" but rebalance each year- cash flow planning is key. My partner reckons we should keep double that and reinvest half after a market crash - ( as usual always expecting an imminent crash) but I keep hearing you cannot time the market and its best to stay fully invested because one could miss the best returns - please do a video on sequence of returns/cash flow.
This is covered by another “expert”. Where he suggests that you have money within the cash part of your pension pot and draw from this and top up from the investment part when times are good. This is sensible advise as you are protecting, albeit not growing the cash. 2-3 years should be enough. I don’t honestly believe we will see another crash as big as Covid in early 2020, the markets have come back within the 2-3 years.
I can't see me choosing 45% bonds. That's just killing your growth potential.
Hi @Bouncing Back... I have a question. In my pension there is a set amount I have to put in, there is also a set amount my company has to put in. Then there is a section which allows me to add an extra AVC contribution.... Also there is a section which allows me to add an additional amount to my pension which is not AVC... but can be either via salary sacrifice or gross. My question is this... Why would you choose to add extra to your pension, when AVC's are an option? What is the benefit of this extra pension contribution? PS: I like your channel...have a thumbs up on me
Great video, thanks.
Glad you liked it, thank you
What's a 30 year calculation worth if it doesn't include the state pension from 65/67 ??
...its all income.
Investments in equities etc, all rise in value over the years with inflation, as does the income they generate. So why is inflation such an issue when calculating future pension incomes from investments linked to the stock markets.
Very good detailed info. Thanks again, now subscribed. Have a great Christmas 👍🎄🍾🥂
Thank you - happy holidays to you too
these vids i love!
Much of what that drawdown calculator comes out with is unduly pessimistic. As long as your drawdown model beats 80% of the possible scenarios you should be OK, and the best approach is to have enough left at 75 to buy an annuity, so that way in advanced old age you'll never run out. Also, if you are expecting an inheritance at some point in the future, build that eventuality in your forecasting model.
I will breach the lifetime allowance by 55 and don't think it is possible to retire on £1m at 55 years old let alone £400k
I’m planning on doing just that at 55. Will let you know how it goes. 😀
Seriously, you must waste a hell of a lot of money. Maybe you need to review your spending habits? We retired on a tiny fraction of that and have a great lifestyle including lots of foreign travel. Be careful with getting very focused on your pension pot. My brother in law was obsessed with upping his pension pot...working long hours and making himself ill. He died two months after his retirement date.
@@Hide_and_silk I drive a £500 Toyota and a £2k Lexus despite being a multi millionaire. I probably spend less than you (home is fully paid off). My money goes to ensuring my kids each have a house when they grow up and investing in other streams on income.
@@ukbondraider Our home is fully paid off, no debts, we are also helping our (3) kids buy their homes (from our savings) and we live very comfortably on well under £2k a month including foreign holidays. Edit - we are most definitely not millionaires never mind multimillionaires.
You said you didn't think it was possible to retire on £1m at 55.
It clearly is.
It may not be, if you wish to increase your costs to look after family, or spend heavily (which you don't), but they are individual choices.
400k will be enough for some. 1m would be enough for most.
One thing that I seem to be missing with all these simulations? They seem to take into account no investment growth. Ie If I have £400k pension pot I would expect anywhere between 3% and 10% growth a year. So If I get 5% say then I could draw down 5% and still have the £400k pension pot left. Am I just being dumb here ?
Past performance is no indicator of future growth. The guides are conservative to reduce the risks of the market doing something wacky.
What about the years when there are consecutive 10% losses? Will you leave the pot alone waiting for it to return back to £400k?
If your not getting 8% from your pension pot, your fund manager needs sacking
This is confusing. If you drew 4% each year out of your pension pot but you still had a return of, say, 6%, then you would never run out of money, would you? Am I missing something here?
Some years you will have lower than 6% return and even negative returns - such impacts on your portfolio could result in you running out of money. Poor investment returns and especially negative ones, in the early years of retirement can be particularly damaging to your portfolio and increase the risk of you running out of money.
Can you do £200k please you missed that one out Thanks
£950k+ ?
Hi, nice video! But is it possible to relocate overseas (which countries?) in order to avoid paying income tax on UK pensions? I believe its possible but not sure. Thanks
In this episode of the pension planning series we look at saving for early retirement and a comfortable standard of living
Smart, Articulate & Beautiful...Lets meet up and live on room service for the next 30 years :)
Are the lifestyle target amounts before or after tax?
Before
Cheers . Great info as always. 👍🇬🇧
Please don't assume you will only live 20 years even at state retirement age. Always assume you will live to 100 or you could be really poor in old age.
UK average life expectancy is for male or female is around 80 years old. If you want to plan for the 100 year old then an annuity is the way to go 5% returns guaranteed. Against the 3% of drawdown.
@@onetone4561 If you had a crystal ball then an annuity would be the way to go indeed. No one knows but as Im sure you know annuity rates suck. You would still have more income planning to 100 than taking and annuity. Better to be safe than sorry.
@@onetone4561 5%? When, at age 70?
Can on do one on using a SIPP to provide for descendants. I understand it's IHT free but descendants have to pay their tax rate on income
Great video. Do you factor the government pension into any of these scenarios that you would get when you were 66 - 68?
£1m pension pot. £33,000 over 30 years
Less tax
Ths series has not aged well. After 1 year the annuity rate is 7.65%, making your 3% rule look silly
Hi Helena, I'm 50 and have a final salary pension which I can draw from now. I want to transfer out to a drawdown pension, but would I now have to wait until 55 to start to withdraw?
You have to normally be 55 to draw on any type of pension unless they pay you early due to sickness.
Some final salary pensions do allow you to draw from before the age of 55 but if you transfer to a personal pension you will be restricted to being over 55
@@markhallows2945 Not heard that, thought the law of the land was now 55?
@@thejupiter2 That was my understanding
Yea I believe it’s normally 55 to transfer out the rules changed a few years ago
i learned to get used to baked beans on toast retirement
Not Heinz either its own brand for you!
There's always so much emphasis on income and not so much on spend. Hubby and I, my parents and my brother all retired at 50 on very small incomes because we got rid of all our debt ASAP and live quite frugally. That's not to say we don't have a great lifestyle - but more importantly we have the health and energy to enjoy it.
@@Hide_and_silk Good point
everyone needs a bit of bitcoin. even 2ks worth will be a meaningful inflation hedge in 10 years time...
Please let me know on my email thank you GR