Is it better to save for retirement or enjoy life now?

[malificent7]

Starting out on new career so dont earn loads nut low mortgage...i'm 43. I am aware that i need to prep for retirement and will enrol on another pension scheme ( i did have some as a teacher).
However, as a health are worker I am aware that life is short and i want to spend the money I earn now on holidays etc.My mum died at 58 before she took retirement.
Aibu to think only high earners can both save and enjoy life now?

@WombatChocolate

I think you have to get informed first to be able to decide what the right balance is.

So, you need to know what the impact on your retirement will be in you put in £100 to pension or £400 a month.

You need to understand what any defined benefit pensions will pay you per month in retirement and what any defined contribution pit will allow you to get as an annuity pension in retirement per month, or if you drawdown 4%. Once you know that, you can decide what is a ‘middle ground’

When lots of people look into this, they realise their pension will pay them less than £3k per year in retirement and also that they will only get £3k from state pension as they are well below 35 years of contributions. They realise this is nowhere near enough and so then they decide to put more into pensions now and spend less now,

A few people realise their pension will deliver vast sums and they can afford to spend more now.

So, you need to create a government gateway account so you can see what your state pension is worth. Is and what it will be worth at the time it pays out at your state retirement age. Assume nothing. You need to find out what any pension pots are worth and what likely monthly or yearly income will be from them. Then you can decide.

This approach of ‘middle ground’ which means randomly choosing a percentage to put into pension, and randomly selecting spending money each month is daft because it’s random and based on nothing. You need to be informed to actually choose a middle ground. Many people are choosing an option wincing will leave them in poverty in old age.

For those with defined contribution pensions (most people now who aren’t public sector workers) you can work on a basis of £30k spent on an annuity will buy you around £1k of yearly pension. Or, you can work on it being affordable to draw down 3.5% of the pension pot, each year from retirement to cover a typical length of retirement.

Look at what you’ve got so far and if you go at the current rate what you’ll have at retirement. Don’t put your head in the sand and just say ‘I’m middle ground and putting something into pension and something into treats for now.

Well said!

I have a good pension.
I’ve paid into it all my working life. Haven’t noticed it going from my pay because it’s always just gone.

Thinking about paying off the mortgage is a decision we made based on your opening question op.
Pay it off or live? We chose holidays and life.
So we still have the mortgage which is decreasing nicely and we have (had….thanks covid) fabulous holidays.

I lean more towards saving because I want to retire early and the things I enjoy in life don’t cost much anyway. I am happy having a frugal lifestyle and don’t feel like I’m massively missing out on anything by saving.

I'm a middle way person too. I'm looking to plan the next few years til retirement now in terms of reducing hours etc. so I can do other things I'm interested in.
I have two good work pensions and full state. I save to travel now with my family while the DCs are at home (uni age) but do have other savings. We do a big trip every few years and holiday modestly but well in the meantime.
My family seem to die in their late 70s and that's frighteningly close so I want to enjoy as much now as possible!

The state pension of £3k/year is not that far off my annual Council Tax bill - plus, gas, elec, TV etc. People who are not saving privately are going to have a big shock and/or life adjustment.

The state pension is just over 9k. Most definitely NOT 3k!

@Guacamole001 only if you have 35 years of contributions.

I pay into my NHS pension every month so use my wages and to enjoy life and squirrel a bit away for emergencies

@fedup078

I also hate the thought of squirrelling money away and then if like my mother I die single with no dependents my pensions will just go back to the government/ pension company

Not the state one but a private pension can have anyone you want for a beneficiary - pretty sure you could leave it to a charity of your choice (not a pensions expert so don't take my word for it)

@cptartapp

Well don't fall into the trap of saving for retirement/a rainy day and then when you get there refuse to spend it. PIL continue to live thriftily despite being very well off, with no one seemingly enjoying it. Money just piling up whilst they sit in the cold and do everything on the cheap. If DH is lucky enough to inherit then he'll damn well spend it on enjoying life rather then repeating the miserable process. That I don't get.

I agree with this. My parents neighbour died a few years ago at 90. He had lived in his house for 60 odd years having inherited from his parents so was mortgage free pretty much his whole life. He had quite a senior role for Royal Mail and took early redundancy when he was 60 and got a huge payout and very good pension. The house was falling apart. Damp and cold. He never put the heating on. He used to dry teabags on the washing line and reuse them and used to spend his later years walking round the streets looking for skips and would help himself to all sorts of junk. He died and left his house (worth £300k) plus over & £1 million to his distant nephew that he rarely saw. Absolute madness

Yes not everybody has 35 years in the state pension pot. Luckily I am nearly at that level. Not that it is enough to live on!

So is it 35 years of full time work you need to get the full state pension? Are maternity leave taken out and is part time work pro rata'd then?

Don't do what I did & I paid the missing contributions when I was on mat leave. I've paid NI since I was 17 & through uni & my retirement age is 67 so that's 50 years of contributions

@Drunkpanda

So is it 35 years of full time work you need to get the full state pension? Are maternity leave taken out and is part time work pro rata'd then?

No. You don't have to work full time. If I understand it right, you need to make a minimum ni contribution equivalent to a lower earning limit. So, say in the year 2019-20 - the lower earnings limit was just £118 per week which means if you earnt more that just over £6k that year and paid in contributions on that income, regardless of hours per week or which months you worked, then you qualify for a full year's worth of ni contributions.

That's a really helpful explanation, thank you @FourTeaFallOut

It’s difficult as both my dad and fil died before reaching retirement. Fil was desperate to retire and was just a few years away, I always feel he was robbed.

@BashfulClam

It’s difficult as both my dad and fil died before reaching retirement. Fil was desperate to retire and was just a few years away, I always feel he was robbed.

If either DH or I died before retiring the other gets their lump sum paid out. If either dies after retiring the other gets half each month.

drunkpanda you can check your NI contributions via the Government Gateway and it will show exactly how many years of contributions you have. Also, there is a Pension Forecast you can look up, again accessed through the Government Gateway.

Do both! My dad is 63, retired last year. Diagnosed with stage 4 cancer a month after he retired. We are now rapidly approaching end of life care and he hasn't done even half the things he wanted to do with my mum when retired.

I agree with the PP's that say do both if you can.

Personally though I like to enjoy my life now (within reason!) and 'make memories' with my DC. Yes, I know that many people find that a sickly phrase and yes, I also know that you do not HAVE to spend lots of money to make memories but I have found that as the DC are getting older most things that they are interested in cost £££.

My parents died at 62 and 65 so in the back of my mind I have a feeling that I won't make 'old bones'-daft perhaps but I would hate to save for a future that might never happen.

Whilst I'm fit and healthy (ish!) then I will carry on treating my DC and enjoying life as best I can :)

I have to say I never saved for retirement but I do have a small occupational pension and have inherited my late husband's pension which is quite sufficient.

Thank you, @PaintYourDreams I will register for that today

I think it's important to think about what "saving for retirement" might actually mean. It's not necessarily about trips to the seaside and lunch out, etc. Most of us will be much older than our parents were when we retire.

For a lot of people, it's about paying a cleaner, when you are unable to manage on your own. The quality of ready meals delivered, if you are too infirm to cook. The heating on constantly, if you can't move from your chair. The things that enable you to stay in your own home, if that is your preference, or give you more choice of care options if not.

I'm in my early 60s, won't get my state pension until I'm 67 and frankly am a bit knackered. I'm also very bad at boundarying my work - I'm a bit of a workaholic, which isn't great when you're self-employed. I have a pension pot which my financial adviser has confirmed that I can take some money out of without affecting the size of the overall pot - eg on average it won't get any bigger but it won't get any smaller. So, my plan is to take some money out every year until the state pension kicks in, and use that to reduce the amount I have to work. I will then use that extra time to do nice things, and hopefully feel a lot less pressured. So, a sort of middle ground! I really don't want to wait until I'm 67 before doing anything.

I’m paying into NHS pension which is enough for me as you can’t draw until 67 currently. I choose enjoy life and reduce stressful work responsibility after 55 for me.