Pensions & Retirement

[Azza]

I hope those with private investments are heavy biased on the Weasel Index. Great dividend cover and good PEG ratio at the moment. Expect some serious crashes of some of the stocks as the summer goes on though!

 

[evilwebby]

How realistic is that? If you use a moderate figure of say £20,000, then you'd need a pension pot of £500,000. Obviously you'd hope whatever you setaside each year would gain interest etc., but split £500,000 over a 40 year career and you're looking at £12,500 a year, which given that a great many are hand to mouth, that seems a push.

As you've already allided to yourself, your investments will grow and compound over time. £12.5k compounded at 5% annually over 40 years actually gives you a pot of £1.58million... £4000/year gets you your 500k. £4k/year should be doable for just about anyone, even on very low wages imo, if they prioritise it enough.

Einstein is said to have described compounding as “the eighth wonder of the world”. “He who understands it, earns it; he who doesn't, pays it.” Whether or not he actually did say this or not, I think it's powerful.

 

[evilwebby]

I hope those with private investments are heavy biased on the Weasel Index. Great dividend cover and good PEG ratio at the moment. Expect some serious crashes of some of the stocks as the summer goes on though!

Currently longest running bull market in history.. how long can it go on? No one can say. I've given up trying to call the end, but I have cash on the sidelines to buy more heavily if and when stocks get proper smashed. Current boom is driven by tech and Silicon Valley. When that eventually blows up it will signal the end of this expansionary period.

The FTSE is very weird at the moment; the is a massive gap between value vs growth stocks. Plenty of cheap bluechips trading at low PEs and solid 5%+ dividend.

 

[Methuselah]

Phased in mate.
Pension age will rise slowly
If people who want to retire at an age where they can enjoy life need their own pots albeit opting out of company ones.
Would you put it past a conservative government?
I wouldn't.

I wouldn't put it past a Labour government either. It was Labour, under Gordon Brown, who introduced the tax raid on pension funds. Continued by the Conservatives. The only common denominator is that non of the tax raids affected MP's pensions.

 

[Cool_Blue]

Well, this is the thing, and one variable is dependent on another.

The most important thing is how much you save. This is probably more important than the rate of growth in most cases.

Why? Because your savings rate is inversely proportional to your spending rate. If you spend everything and never save anything then you will never have anything contributed to any investments and have nothing to sustain your spending if you ever stop working, so you can never retire . If you only save 10% of your income then you are spending the other 90% At that rate you need to work for 50-60 years to sustain that level of spending. If you double this to 20% then you are not only saving more, but also crucially spending less of your earnings, so you can expect to grow your investments to a level that can sustain your level of spending after 35-40 years. If you can achieve a 33% saving rate then you can be in a position to retire after 25 years, save 50% and you can retire in 17-20 years... see where this is going?

Savings is hard if you don't make a sizeable income. For some people it is hard even if they do make a sizeable income, but the simple fact is that most people don't save enough. There are people who do manage to save a big amount of their income, even on fairly modest salaries.. it's about lifestyle choices. But nobody is going to do it for you, or force you to do it, and those who don't save enough will talk about how its impossible for them to save more instead of figuring out a way to do it.

The other discussion to have is the generosity of the state pension. A full state pension is worth £8.5k p/a (and it goes up with inflation). To get that level of income in a private scheme you need to amass somewhere around 250k-£300k. We know that most retirees don't have a private pot anywhere near this big, yet that is the "golden handshake" the government is giving to each and every retiree. That level of unfunded obligations is why the state pension is surely destined for collapse in the future.

Unfunded obligations?
Isn’t this what we pay NI for? Any politician that suggests binning off the state pension will be committing electoral suicide.

this is the “golden handshake" the government is giving to each and every retiree
No. If you haven’t got sufficient NI, you get a much reduced state pension.

 

[evilwebby]

Unfunded obligations?
Isn’t this what we pay NI for? Any politician that suggests binning off the state pension will be committing electoral suicide.

this is the “golden handshake" the government is giving to each and every retiree
No. If you haven’t got sufficient NI, you get a much reduced state pension.

It’s a Ponzi scheme. Current NICs are not invested for the benefit of the saver, they simply go towards paying for the retirement of current retirees. The scheme depends on people at the bottom paying for the people at the top.
I wouldn’t say the partial state pension is much reduced, it’s still worth about 80% of the full one.

 

[LEONARD]

I shall retire-die, as I have lived.

BEYOND MY MEANS.