100k pension pot at 42

[hlu2]

I've finally checked my pension pot and age 42 it's currently 100k. Putting into random calculators, it seems ok at current money but with inflation in 25 years time, it seems tiny. And yes I should have been keeping up with this more, but I didnt start working until I was 30 (postgrad degrees and two pregnancies) so have only had 12 years of working and saving and with two kids and a house - pensions just didnt seem all that relevant until now. How much does everyone else have around this age?

I don't have a pension, and not qualifiable yet for a full state pension.

I've about €200k and put in €1k per month., but I'm 47.

I'm starting to think lately that I'd rather keep the €1k per month now and enjoy it, instead of waiting another 20 years when I could be dead anyway.

This is the kind of information people need.

People don’t realise how big the pension pot needs to be to give you more than a couple of thousand pounds per year.

Hooefully this thread is helping people get more informed about what they might need.

I think the thought of having 300k now to only receive 10k per year is pretty insane. Am assuming that in 25 years that pot would need to be much bigger to keep up with inflation. This thread has been pretty odd, on the one hand people telling me that am boasting while others tell me that it's absolutely not enough and I will live in poverty

I agree and would like to see more threads on women and finance rather than less.

Its no secret that women often lose out in pensions, pay rises etc even without the maternity tax and the default carer tax. More threads on how to negotiate a pay rise, how to plan for a pension, how to progress in work after children etc would be a damned sight more useful than yet another thread on evil MiLs and "look at how little I eat".

The OP was a late entrant to the workforce after education and children but in 12 years has made it to the top ten percent of earners. That should be celebrated not shamed.

She hasn't started a thread to shout about her megabucks and the problem of knowing which Chanel handbag to buy this week, she is asking about pensions - the very subject other threads are saying should be taught in schools.

OP: if you are still reading max out your contributions if you can afford it. Your future self will thank you, especially if you need to retire early or have a change in circumstances in the future.

I haven’t looked for a while tbh so couldn’t tell you. However, you need to look at the entire picture. Presumably, your outgoings will be lower when you retire. E.g for us, we worked out that to maintain the exact same standard of living as we have now, we would need to equivalent of £2100 (in todays money) as credit card debt/mortgage/life insurance/CMS payments/fuel to collect DSS will all be gone. With that in mind, we’re not really that worried.

Bear in mind that, as we’ll get £680 ish x 2 as a state pension we’re already two thirds of the way there, that’s before our employer pensions. I just hope that the state pension still exists in the same way.

The other way of looking at it is to reverse the calculation - what do you need to save to have a pot of £1m aged 68? The OP has 26 years left, earns £60k per year. is currently contributing 3% and is already starting with £100k.

If you make some assumptions about future pay rises (e.g. 3% p.a. on average), and investment growth (5% p.a.), then total contributions of 15% would grow the pot to just over £1m aged 68.

When I was 42 I had £360k in pension pot. I would suggest that you do need to up your savings significantly to at least £10k a year, max out employer contributions and ruthlessly chase any underpayments from previous years. Over the last 20 years my mortgage interest rate has tracked about 8% less than my pension accumulation so it makes sense to prioritise pension saving with a long term investment horizon ; while keeping up with your mortgage of course

You earn £60k?

I thought the standard salary for a MNer was £100k minimum?

I think it’s a good discussion to have as so many of us are unaware how much we need to put away to live on.

I have a final salary pension but only paid in to it for around 6 years as then I career changed. My contributions were matched by employer so that was a very good deal at the time and it seems to go up every year. Currently around £90k but aware this is not enough.

Rest will be from property. About £500k between DH and I on a buy to let that has gone up in value and been paid off. Property in both our names if we split up. Then the possibility of downsizing current home.

That may be enough. I have no idea. I like my job (I work for myself) and I plan to carry on working if I can in a part time manner until at least 70 so that should supplement it all.

I agree with those saying the OP shouldn’t be shamed - these are important conversations.

I am a high earner but grew up in poverty and I’m terrified of going back there so have always prioritised pension contributions (and have been fortunate to be able to do so). I’m also aware that I might want to scale down work/contribs as the kids get older so putting as much in as I can now. I’m 36 and have been saving 20-25% of my salary (inc employer contributions of 5%) for the last 10 years.

but the pot will grow with inflation so a pot of 300K giving you 10k as a pension is figures at present so at present if you retired tomorrow with full state pension and a pot of 300K you would get 10K state pension and 10K index linked personal pension ie a total of 20K index linked or if you used the 300K as draw down taking 10,000 a year with no interest it would last 30 years however while you take this years 10,000 you have 290,000 earning interest so hopefully you can take 11k next year ( inflation being 10%)
20K for a single person with no child care or housing costs beyond maintenance is not poverty it is not month long cruises either but my Mum lives a nice life on about 16k UK holidays a gardener every 2 weeks plenty of coffee trips runs a car keeps her house warm etc, when you are 70 you generally have enough stuff so are spending less than earlier in life

The pot size which determines what you’ll have in retirement, is the pot size when you retire.

So £300k when you retire might get you £10k over year. You won’t have put £300k in as some of it will be investment growth and tax relief.

So £100k now would get you just over £3k if you don’t put more in and it doesn’t grow. Those are figures worth knowing, so you can map ahead to see what you might need in retirement.

Some of the websites linked to suggest how much money per year singles or couples need for basic/comfortable/luxurious retirement. That stuff is useful too. It can give you a target.

If you have a target and you know what state pension you’re on track for, you can see how much private pension income you need per year to achieve your target. Then you work backwards to see how much you need to put in over year to achieve the pension pot size needed.

Things don’t always work out exactly as planned, and sometimes you have to accept you won’t pay in as much as really needed to achieve your target, but having the knowledge and acting in it is very empowering and liberating.

OP, you should have a look at the sites and consider what income you might want in retirement.
Look at your state pension forecast.
Consider how many £k your private pension needs to give you per year.
Think about the pension pot size needed if you need £30k for each £1k pension per year.

I think the reference to 300k is the amount you might aspire to in 25 years when you would like to retire.

Although I had two work related pensions, I also had a private pension from my divorce settlement and I was amazed at how much that grew in value over the 20 odd years from starting it to when I retired. As annuity rates were very low when I retired six years ago, I left the pot with the intention of using drawdown to access lump sums periodically to supplement my work pensions.

Of course, that pension pot has diminished recently with the economic downturn but that’s life!

Hey
I'm 39 and a half

I have £139k

Contributing £800 + high rate cash back £400 = £1200

DH and I aiming for £280k each by 50.

We have 3 BTLs (income £1.3k each but £400 mortgages and high rate tax payers) so once paid mortgage off around age 45, going to aim to pay them down.

Then hopefully go PT at 50 and stop work at late 50s/60 and live off pensions and BTL income.

If people can’t handle the realities of pension saving, they should perhaps avoid this thread.

It’s ridiculous to suggest that people (women in particular) should not compare notes and experiences on pension savings for fear of hurting someone’s feelings.

I did nothing at all about pensions when I was in my twenties which was a terrible mistake. I didn’t understand what they even were. I also worked for two wealthy but mean employers in a row who decided you had to work for two years before you could join the workplace DC scheme and even then made the barest of employer contributions.

I have been trying to make up for it since but I kick myself everyday because contributions made in your twenties are so valuable. Right now mine is at about 300k (counting increases in market value) and probably 70-80% of the contributions have been made in the last 8 years thanks to an employer with a very generous matching scheme. Most of the rest is from a brief spell in the civil service where my total pension contributions were bigger in eighteen months than the previous nine years in the private sector…

Another thing to bear in mind is that single people need a larger pension pot in retirement than couples because their expenses aren’t shared….

Ok, leave aside the “wot about me” responses…

so, right now the market has slumped in terms of investment values. I am down about 10% of value on investments 2 years ago. So it’s not really a good time to focus on absolute value.

your £100k pot should be invested in a lifetime tracker type product. It should therefore be managed with a higher risk but bigger returns in your younger days, to consolidating in lower risk as you near retirement age. Therefore if that’s where you product is, and you are younger, you will see bigger losses at point where market slumps. That is why investment is along, long game.

you have probably around £6-7k per annum draw down pension (don’t use annuity rates- no one buys annuities right now) with that sum. As you are higher rate tax payer, stick as much as possible into your pension - currently you get 40% tax relief, so every pound in costs you 60p. That is a much more tax efficient way than sticking inheritance in which gets no tax relief. At some point a government is bound to remove the 40% benefit and make it stand 20% across all tax bands- so my advice, Wack in as much as poosble while you get this big benefit. You should be paying in around 15% of your income into a pension in total. So aim for that.

The full state pension would require a pot of 350k if you had to fund it. It is a sobering statistic.

Same with my parents. They saved all their lives and never lived. Both passed away before retirement. They never ‘lived’.

That is a massive amount to the majority of the country. How could you not know that?

It doesn't sound much and if I were you I would be increasing contributions now.

My pension status at 53 is just under £600K with approximately £40K being added per year by my employer and myself, I am hoping to work at least another 10 years but who knows what might happen.

Depends how I decide to utilise the pot when retirement comes, but it still won't give me a pension at anywhere near my current salary.

Absolute novice here.

The 100k pot - is that per annum, the total across the entire retirement or something else. What does the total pot equate to here at £100k against an annual income?

I heard you should aim for this.

Take the age you started paying in and half it. That number is a percentage of your salary you ideally want being paid into your pension each month from bith you and matched employee contributions.

So say you started at 30 then 15% would be good perhaps 7.5% from you and 7.5% from employer. However, if employer matches up to say 10% then it would be silly not to go up to 10% yourself.

When people say put in 15% of your income - is that before or after tax and does that include employer's contribution or just mine?

Yes exactly this.

The amounts of money people are quoting sound high as a one off figure, but in reality if you live another 30 years after retiring, that takes a lot of funding.