Are you ready for retirement.?

[Trouble]

I pay a pension, its not much approximately £160 a month which i have been paying since 1988.

Its not going to leave me much between now and when im 65.

I worry a lot about old age and where i will be financially.

What can we do to ensure that we are financially secure at 65.?

[rubyred]

I pay a pension, its not much approximately £160 a month which i have been paying since 1988.

Its not going to leave me much between now and when im 65.

I worry a lot about old age and where i will be financially.

What can we do to ensure that we are financially secure at 65.?

This is very pertinent to me at the moment as I am planning my escape route for the future. The government keep changing the goal posts and the ages of retirement keep changing depending on your age before a certain date.
One of the ways to start is to ask your pension provider to give you a forecast of what you would be likely to receive at the age which you will entitled to retire and then also one of the age you would like to retire ideally, but be realistic. You can ask the State Pensions Scheme to provide you with a forecast also. When you have these you can then look to other ways to top up what you paying to get what you might like to get for example buy extra years if your private or employer pension offers this scheme, AVCs or buy additional amounts, that is if you pay for example [only a hyperthetical one] £50 each month now you may be able to get extra pension each month when you retire. It is very expensive. You can go to see a financial advisor and one that is an expert in pensions who should be able to advise on how to make investments, but there is a charge. Make sure you are not paying married women's contributions towards your state pension also and that your contributions are up to date.

[gamebird]

Is it financially smarter to pay the hypothetical £50 per month into a savings account rather than a pension - would the returns be better?

[Twirly]

Live fast, die young?

Seriously though, I'm not sure that there is any surefire way of providing for the future. Most pension plans seem to do so badly when the markets crash as they've done recently, that if you have to buy your annuity during a downturn, you're stuffed regardless of how much money you've stashed away.

I've heard people say that property is the best bet. So long as the mortgage is paid off, and there is still a rental market, that could provide an income. If at all possible, that is what I'm hoping to do, as I know that my pension contributions are paltry to date. But I have no idea if it's going to work or not - it's dependent on too many other factors.

[rubyred]

Is it financially smarter to pay the hypothetical £50 per month into a savings account rather than a pension - would the returns be better?

I dont know the answer to this sorry, I wonder would it depend on how long off retirement you have to go to build up adequate savings in a savings account.

[stewart38]

I pay a pension, its not much approximately £160 a month which i have been paying since 1988.

Its not going to leave me much between now and when im 65.

I worry a lot about old age and where i will be financially.

What can we do to ensure that we are financially secure at 65.?

I have invested £3 in this

http://www.national-lottery.co.uk/pl...romillions.ftl

Im hoping for a £48,999,997 return on my investment.

If I shouldnt be successful I cant seriously see myself 'retiring' I like the Maldives too much.

[philsmove]

I sold my business and retired a year ago

But am about to start a new part time business, to pay for a few luxuries

My advice

1 Get a job as a civil servant, with an index linked final pension salary pension

2 Find a pleasant job that you can do part time after retirement age

3 Marry a millionaire / millionaires

But the big problem, as Ruby says is, the government keeps changing the rules


Don’t

1 Put all your eggs in one basket

2 Do what my Aunt Hilda did – worked and saved very very hard for retirement, then popped her clogs 10 days, after she got her gold watch

Be very wary of financially advisers who do not change a fee, but make their money by commission

[Beowulf]

Live fast, die young? .

I think I'm marrying the wrong woman !

My Pension provision is woefully inadequate but post wedding it'll be being bumped up something serious.

I currently also own property in Aberdeen still although I'll probably sell that in a few years to contribute to the shared marital home with Twirly.

I'll just spend the 5 years preceding my retirement date playing the national lottery

[Double Trouble]

I think "Stay at home" Mum's/Dad's or people who work part-time to care for a family are lost when it comes to pensions. I paid in to a pension for three years before I had children, obviously that isn't enough to keep me in bingo and Worthers Originals when I retire.

I do own my house so I suppose that is better than no security at all.

Gav's worth a few quid dead, so as long as he goes before me, I'll be alright.

[Gav]

Gav's worth a few quid dead, so as long as he goes before me, I'll be alright.

There is small print in that policy so those of you busy typing PMs to DT offering to "help me along" for a percentage needn't bother!

[Rachel]

...Don’t

1 Put all your eggs in one basket

2 Do what my Aunt Hilda did – worked and saved very very hard for retirement, then popped her clogs 10 days, after she got her gold watch

Be very wary of financially advisers who do not change a fee, but make their money by commission

Completely agree with this.

I've started to think more and more about retirement planning. I'm lucky that I've been in a final salary pension scheme for the last 15 years, and have some AVC's, but working for a charity, that final salary is never going to amount to much!

I've read that, in order to have a reasonable lifestyle in retirement, you need the equivalent of approx £400,000 in your pension pot/savings. Which is a very scary figure to contemplate!!!

But I'm thinking that the best possible thing to do is diversify as much as possible. E.g.:

- Put as much as you possibly can into your cash ISA every year. Even though 'cash' will never perform as well as stocks, it's 100% safe and you know you'll never have to pay tax on it.

- Get a stocks & shares ISA or some kind of unit trust/share holdings - a little in the higher risk stuff, but never so much that you can't afford to lose it or might have to risk selling it when it's at rock bottom.

- Continue with the pension - and AVCs if possible

- Make sure your NI contributions are up-to-date

- Even buy gold, if you wish, or something else which you are sure there will always be demand for. But, again, only a small proportion of your savings so that you're not completely reliant on it's value.

- Property, yes, if possible. In this country, property will always eventually go through the slumps and perform better than anything else because of the shortage.

- Make the most of your children's savings accounts & their tax free status.

- Decide what's going to make the best of your money at any given time. Every spare penny of mine, at the moment, is going into my offset mortgage, since saving rates are so low and my offset is really high, due to a high fixed-rate mortgage.

My goal is to try and offset the entire mortgage amount so I'm not paying any interest at all on the loan amount. (I probably won't get anywhere near it, but it's a good aim). And the beauty with offsets is that you're not paying any tax on the money, you can get any of it out again instantly, if you ever need it, and you still have all the money at the end of the mortgage term to choose what to do with - i.e. pay off the mortgage, put into ISAs, etc.

- And finally, make sure that your savings (whether that's ISAs, regular savers, overpayments on the mortgage, ...) go straight out of your account as soon as your salary is paid so that you're not tempted to spend it. Work out your budget, exactly how much you can afford to save every month and set up the direct debits to make sure it happens.

- But most importantly, as Philsmove says, never forget that you could die tomorrow. Don't save everything - make sure you keep enough to have fun with today.

Rachel

[JiveLad]

PART 1: PLANNNG

Building on what Rachel posted (size of pot required) - a good start point is to decide what your pension income target will be - and by when. This gives some focus - and a 'target' - and concentrates the mind.

To do this you will have to work out your budget - and usually this is easiest on a monthly basis. So - firstly - get a budgeting spreadsheet (the one at moneysavingexpert.com is recommended) - and get the numbers in (all your spend - insurance, food, drink, dance, clothing, council tax, cars.....the lot).

Then when you've done that, you have a rough idea of what your monthly expenditure needs are. Let's say it comes out at £2000 per month. To get that kind of monthly income, you annual gross income will have to be c. £30,000 (let's say - actually more than that).

In order to pay for that out of a pension 'pot' (assuming a defined contribution/money purchase scheme) - the pot would have to be c. £600,000 - assuming a 5% annuity rate.

This ignores of course, your state pension (which would enable you to buy a few more packets of peanuts or Wurthers originals).

Even those who started early and are relatively high earners are unlikely to have built up sufficient for this. Most people retiring in the next 20 years (aisde from public sector fat cats (teachers, nurses, police) will be having a combo pension income of:

- private pension provision (likely to be meagre for most)
- property (eg. capital gains....downsizing, buy 2 let income or reversionary mortgage)
- part-time working
- inheritances
- other savings
- renting out their rooms/bodies.

So work out:- where are you now? Where do you want to be at age XX? How are you going to achieve it (how is your income going to be made up....)?

-----------------------------------

PART 2 will follow.........

[gamebird]

3 Marry a millionaire / millionaires

PART 2 will follow.........

Could Part 2 please advise on point 3?

[philsmove]

PART 1: PLANNNG

. Let's say it comes out at £2000 per month. .....

When i first started work £2000 a year would have been more than adequate

so don't forget inflation

[David Franklin]

In order to pay for that out of a pension 'pot' (assuming a defined contribution/money purchase scheme) - the pot would have to be c. £600,000 - assuming a 5% annuity rate.

I went to check what annuity rates currently were, and was amused / sickly fascinated to find another way to boost your pension.

Take up smoking!

(The argument being that smokers get paid more because they're unlikely to be around to collect for many years).

Of course, one wonders how the annuity providers check whether or not you're really a ciggie addict.

[DavidY]

Is it financially smarter to pay the hypothetical £50 per month into a savings account rather than a pension - would the returns be better?

I believe the tax situation is different - savings accounts are taxed but I believe pensions have tax advantages. (Don't ask me what they are though. )

[FirstMove]

Is it financially smarter to pay the hypothetical £50 per month into a savings account rather than a pension - would the returns be better?

(Assuming you're a normal rate tax payer and lots of other things)

With a normal savings account, you pay tax at 20% on any interest you receive. Once you get the money paid to you, you can do what you like with it. Leaving it in the bank to accrue interest on interest is one option.

Individual Savings Accounts are the same as normal savings accounts, except that you pay 0% tax on any interest. The government have set a maximum amount you can save each year.

Money going into your pension pot is not taxed. If you employer pays into the scheme for you, then the deduction is made out of your gross pay. If you make the contribution from your savings, the government refunds the Income Tax and National Insurance that you've paid on that money and adds it onto the amount going into the pension pot.

The pension money can't be touched until you retire in any circumstances. When you do retire, money paid to you is taxed just as though you were getting paid that amount. Remember that the government gives you a tax free allowance each year; if your pension pot isn't big enough, you may not have to pay any tax on the money paid out either.

The correct choice of investment depends on how long you live, whether you might need access to the money, current and future UK and global economic conditions, inflation, current and future tax law, whether you may become a higher rate tax payer, cycles of the moon, sparkliness of dance shoes, .....

[philsmove]

......... sparkliness of dance shoes, .....

You can also invest SOME of your savings yourself. A home is probably the number one option but you can even invest in shoes

[philsmove]

Very good report in The Economist its not free, but worth reading well before you retire

In summery
We should forget stopping work at 65, it seems to suggest, after 60 ,we should look to winding down a bit ,working less hours and taking a less strenuous job, possibel in the same company, but not stopping work completely

[Seahorse]

Just as a point and as someone who just about to start a civil service position. I've just found out that my employer who shall remain nameless changed its pension rules and closed their final salary scheme several years ago.

I'd imagine that other public sector employers will also do so in future.