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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

AIBU to be more concerned about saving for retirement than paying off the mortgage?

74 replies

Mickeysmonkey · 05/05/2015 03:50

I am 38 with 3 small children aged 7, 4 and 1. DH is late forties. We've been married for 10 years and own a house. Both of us spent our twenties having fun - building our careers, yes, but not saving much and spending what we had. I don't regret this at all!

I have taken a few years out of work and recently returned to full time employment. I earn a decent amount - although I won't be retiring to a yacht any time soon! - and DH has a business that's doing well enough to support us.

Since we've been living on DH's salary, I wanted to be sure that we did something productive with my salary and didn't fritter it away (which I know from past experience we'd be likely to do.) So we made the decision to invest in my company's pension scheme and I save the maximum that the IRS allows (I'm in the US).

We have a massive mortgage that won't be paid off for another 12 years. A couple of friends of ours (same age) have expressed surprise that we are not overpaying our mortgage to pay it off sooner. One even thought it was "a mug's game" to save in a pension scheme. I've seen that attitude here on MN too. I really don't understand it. I see the mortgage payment as giving us somewhere to live, obviously, then the house should allow for some inheritance for the children, hopefully. I've never considered it a nest egg. I don't think for a second that there'll be a state pension when I retire and I would hate to be financially dependent on my children.

How do other people think to allocate their savings and think about retirement? AIBU to think that this should be the priority?

OP posts:
prepperpig · 05/05/2015 08:11

"Bagsied"

catnipkitty · 05/05/2015 08:13

Both options make sense. We paid off our mortgage early (thanks to inheritance) and it has been a big relief not to have the repayments going out every month. We have used some of this money to pay into savings and pensions etc.

Teacuptravells · 05/05/2015 08:14

We're in the UK and with one of us self-employed and the other not earning at the moment so we're in a really precarious position wrt (lack of) pension.

Our mortgage (v small ex council but big to us mortgage) is due to be paid when my partner is 60, so we're working on the overpaying mortgage rather than pension tactic here. I think we'd seen Talkingpeaces doobry as to how overpaying now saves years of mortgage at the end.

I don't like our position one bit, but we aren't silly high earning.

nettlewine · 05/05/2015 08:19

morage

That might have been good (selfish) advice for the current generation of pensioners, so never buy or save so they you get lots of handouts for 20-30 years in retirement. But for the next generation these benefits will not exist as they are already massively unaffordable.

morage · 05/05/2015 08:19

If you are in a local authority pension scheme, you can't withdraw until state retirement age. For me that is 67. I have spent many years not being well paid, and struggled to pay into the pension. A waste of money. I wish I hadn't done it.

morage · 05/05/2015 08:21

nettlewine - They won't let older people starve. So in reality what will happen is those who are lower paid and so only have small pensions, will be no better off than what they would have got in benefits. Having a state pension means for lower paid people it does make sense to save extra.

prepperpig · 05/05/2015 08:25

mirage if you're a local authority employee then as well as your tax saving on your employee pension contribution you have been getting circa 24 percent paid into your pension by your employer (the tax payer) so you've not done badly out of it. Most of the money in your pension wasn't put there by you.

Your advice to people is bad (and selfish) advice.

prepperpig · 05/05/2015 08:26

"morage" - apologies - autocorrect

nettlewine · 05/05/2015 08:28

They may not make them starve, but they won't have the same lifestyle that current pensioners have. Won't be allowed a spare room and will probably have to be working till 80.

Plenty of starving pensioners in Russia on the streets.

brusselsproutwarning · 05/05/2015 08:30

Taking note, similar situation here,trying to figure out what to do.

thehumanjam · 05/05/2015 08:38

I have two pensions. A public sector one and a private one. The public sector pension would've been good if I had stayed working in that sector but I was only there for 6 years so didn't accrue much funds. My private sector pension that I paid into for 8 years (along with employer contributions) is practically worthless. Unless I find a job in the public sector I will not pay into a private pension again.

It makes more sense to pay off a mortgage first. Once you have done that you can save for retirement. My property is my pension really anyway. We will downgrade when we retire and live off the excess equity.

prepperpig · 05/05/2015 08:45

Yes but humanjam your pensions are only worthless because you didn't pay into them for long. pensions have to provide an income for you for years. sometime in the region of 30 years. As a result the income they produce appears very low. The only way to build them up is to pay in regularly. A pension that you openly paid into for a couple of years isn't going to be worth much (the same as if you'd put that money into a savings account it wouldn't be worth much).

IMO everyone should sit down and work out what income they feel they will need to live on in retirement. This will be different for different people depending on their lifestyles and other commitments. Then work out how much you need to save (in a pension or anywhere else) to give yourself that sort of income throughout your old age. Its very sobering when you see it in black and white. Anyone who has access to an employer contribution that they are not taking is just turning down free income (for later life)

nettlewine · 05/05/2015 08:50

How do you know your private sector one is worthless? I was only in mine for 8 years but its been going up rapidly and is now worth over 60k. Kind of seems like a lot to me

nettlewine · 05/05/2015 08:51

Although I have heard the standard fireman s pension is worth 500k , not sure how true that is

prepperpig · 05/05/2015 09:02

For illustration purposes, my pension pot is currently sitting at about £180k since I am self employed so no employer contribution. That combined with the full state pension is predicted to give me an income of £15,700 per annum. It's not a lot really. It's even less if the state pension changes.

Pensionerpeep · 05/05/2015 09:03

This reply has been deleted

Message withdrawn at poster's request.

Topseyt · 05/05/2015 09:09

We do both. DH was on one of the few remaining final salary pension schemes until it was frozen late last year in favour of a money purchase one.

He is 52 and I am almost 49. We should be mortgage free in the next 4 or 5 years.

I had to take years out of work due to childcare costs but am working part time again now and hope to start saving into one of my pensions again soon (having children can bugger up pension arrangements).

There is a lot to be said for doing either or both options.

MrsKoala · 05/05/2015 09:10

I am reading this thread with interest. I am 38 have 2 small DC and no pension. I have no means of paying into one. Dh is 34 and has only just started a scheme at work, but he has a decent salary now. I have earned low wages and rarely worked anywhere longer than a year up to age 35, when I gave up work completely to have the DC. We have just bought our first house together, so mortgage won't be paid off till I'm 63ish.

However, we do own a second property which we rent out. The rent covers the mortgage but we view that as our 'pension' we also have some money in shares.

On one hand I feel pretty lucky and like I am doing well, but on the other hand I worry that I personally have nothing.

MrsKoala · 05/05/2015 09:12

Can I ask a question about pensions - if you move jobs frequently can you take them with you? When I left jobs before they always said no, so I have about 5 pots of very little money dotted around the place.

prepperpig · 05/05/2015 09:15

I think you're generally told to leave them where they are MrsK due to the charges involved in moving them (but you need to take advice really because things change).

DH has a tiny one from his first job which I think will pay out about £25 a month!

Pensionerpeep · 05/05/2015 09:26

This reply has been deleted

Message withdrawn at poster's request.

MrsKoala · 05/05/2015 09:28

I don't even know where 2 of them are anymore - lost the paperwork yonks ago - as they were jobs about 20yrs ago when I was on 7k a year. I doubt there is more than £6-800 in each.

morage · 05/05/2015 09:28

Pensioner peep - I have been low paid most of my life. You can only take it out at 55 with permission. But as the age I get it is 67, a pension at 55 will be tiny.

Jackiebrambles · 05/05/2015 09:31

Yeah it can cost a bit to shift a pension pot, particularly if its quite a small one. Might be more cost effective to leave it where it is. You should get advice though if you can as its a minefield I've found!

DH and I took advice as I had a pension pot (8 years worth of contributions) at my old employer. It was almost £50k. The advisor looked at it's performance over the years since I effectively left the scheme and was absolutely horrified at how badly it was performing! So he advised I shift it and he helped me do it. Its now made lots more money with a bit of proper investment 'management'.

In answer to the OP, for tax reasons we are trying to maximise our pension pots/contributions now. We are both late 30s and have 1 young son and another on the way. BUT we want to pay off our mortgage too. I think we will try to start over paying the mortgage in a couple of years, once the expensive nursery fees stage is over!