AIbu to wonder how I’ll cope when I retire?

[HurricaneZeldaAndToto]

Oh wise Mumsnet, I really need your help as I’m getting increasingly worried about the future and how we’ll support ourselves when we retire.

I’m 48. I currently work part-time and my income is 60k pa. DH earns the same and pays 50% of all bills etc. We have a mortgage with 20 years left to run at £1.5k per month. This will increase to £2k when our deal ends next year.

Neither of us have any savings, we used them all to buy our house 7 years ago and for various repairs since.

I only have £6k in a pension pot, as I’ve worked for myself most of my adult life. DH had
has only £4k.

Foolish, I feel like we’ve left it too late to properly plan for retirement and we have no idea what we should be doing!!

DH and I have only approx £60k inheritance in the (hopefully long distance) future.

What should we do? Neither of us have the kind of families who could help out with advice and this is not something I’d feel comfortable speaking to my friends about, as they will all inherit enough to never have to worry.

AIBU to think I’ve left it too late?

Where do we start?

I don’t understand why you keep saying you can’t work full time because the work isn’t available.

You know you can have more than one job, right? At your age I was working four different jobs so I could keep a roof over my children’s heads.

Seek PT employment and use that money for pension, and/or overpaying mortgage.

Get a full time PAYE job
£6Ok with no pension is worth much much less

You could rent your house and go travelling or downsize and move to a differnt cheaper area?

You're going to have a mortgage until you're 68? 😯

I'm not sure what the answer is (downsize and reduce your mortgage payments?) but I'd recommend saving as of now.

Agree with what others have said. Start saving now. Imo pensions are great because of the tax benefits. You can reduce your taxable income by saving money. There are also ISAs and first £500 of interest is tax free. I think you will need to focus on saving as much as you can as you won't have much benefit of compound interest. You can also downsize when you retire. There is only a benefit in overpaying the mortgage if the interest rate is higher than the interest you would receive on the money in savings (taking into account the tax position).

If you've been putting all that money into renovations to the house OP, do you know what it's actually worth at today's prices? You may find it's worth a LOT more than you realise. Also, when you retire, your house will likely have appreciated even more in value, obviously smaller properties will have gone up in price too, but not by as large a percentage, so you may well be able to release a lot more capital than you think. Obviously this won't replace a pension, but if you also take advice from a financial advisor, and follow it, I feel sure you'll be fine. I guess to a great degree, it's a case of what standard of living you want to have when you retire. If you're used to blowing money on big expensive holidays, replacing cars every year, or have expensive hobbies, etc., then you may not have as much money to indulge in those things as you would like, but also bear in mind, that you will be older, and possibly have considerably less energy than you have now. By that point in life, you're likely to have absolutely everything that you actually need, so would only need living expenses, therefore it may not be nearly as bleak as you're anticipating. The thing is, no one can accurately predict the future OP. Looking on the dark side, you may not even live to retirement, or like my DH, your health may suddenly deteriorate, making travel and other expensive things that you do now, impossible. Again, this could mean that you won't need as much as you might think. We get by very nicely on a really small pension pot, and our savings, but that's because our lifestyle has been curtailed by health problems. So I would say, start now, do what you can, and live for today with tomorrow in mind, ie, don't just save every penny in a panic that you won't have enough when you retire, as that will mean that you're not living your life now, and in all seriousness you may never get that far, but equally, don't spend money frivolously. We found that an easy way for us to save extra, was when we'd had something on a loan like a car, or when we paid off our mortgage, rather than looking at that money as spare cash each month, we just switched from paying it to the loan company, and instead paid it into long term savings, which was best for our particular circumstances, and of course didn't miss it because we'd been used to not having it. Please don't let people bandying about figures needed being in excess of millions, most of us don't have that sort of living standard in the first place. Although of course, we are talking MN here!!!🙄

@OP I think in some ways you have been living beyond your means to date - by which I mean you have paid for house / refurbishments etc without having set anything aside for your pensions. So if it were me I would start squirrelling money away in pensions right now . As you said - the best time to plant a tree.

An inheritance is not a pension - anything could happen. Best to shift for your selves and start saving as much as you can afford now. If you choose to reduce it in the future - so be it .

Speak to a financial adviser.

You have an excellent income and I am sure you can find a way to make that work for you.

Plenty of people have decent income on retirement who earn way, way less than you do, and have young families to support.

You could be working for another 20+ years. Planning ahead now is a really good idea.

1 Make sure you're on track to get full state pensions.

2 Do a thorough financial audit. I find it hard to believe you've spent that much on house renovations - there are almost certainly savings to be made in your budget.

1. Get an emergency savings fund. At least 6 months salary that you can access immediately if needed.

4 Set up pensions. As higher rate taxpayers, for every £600 you put into a pension you can reclaim £400 in tax. As you're putting self employment money into a SIPP rather than PAYE salary into an employer's pension only the basic rate tax refund will be automatic, you'll need to claim the higher rate part separately. Ask your accountant how to do this. And to calculate any unused pension allowance you can roll forward from past years.

2 self employed people in this position.

Do you have an accountant or financial advisor because they are either rubbish or you aren't listening to them?

Seek out decent replacements, especially ones who are very familiar with the sectors your businesses are in. You should be aware of all grants available, all tax reliefs, all pension opportunities etc.

I'm nearly afraid to ask but do you gave life cover in excess of your mortgage or critical illness cover given the self employment risk?

Yes but when you draw it down you get 25% tax free , but are taxed on the rest because the pension will take up most of your tax allowance.

and it depends when you want to retire as well .

say you think 65 , then you could need income for at least 20 years . The state pension won’t cover your bills .

SURELY this is a piss take.
60k each - £3750 EACH per month after tax.
Even if mortgage £1500, that's shedloads of cash left over - at least £6000 left each month after mortgage, plus bills - I'm hoping the OP can manage on half that.
OP is only 40!!

Quite.

I thought OP said they were 48, so much closer to 50 than 40.

Maybe she’s just panicking because she doesn’t have many years left until retirement age to build up a pension - so even though she earns a decent wage, she’s panicking about how much of that she can realistically afford to set aside each month for pension savings.

I earn much less than the OP and am none the wiser about this is a troll thread or not, but I’ve got no reason to believe it is, because I think the OP’s questions and concerns in her posts seem quite fair.

Definitely start saving

To be more positive as I realise how negative I was before, a few things:

1. if you pay off your mortgage the advantage is that you’re £2k a month better off. If you can pay it off quicker, you can move the extra into savings/pension. It also allows your cost base when retired to be much lower and means you never need to worry about the roof over your head. You also have an asset that you can sell. You’re in the SE (so were we) and you could sell up there in retirement and move to a flat (actually really good for retired people as lower bills and less maintenance) or a cheaper area.
2. If you’re self employed, you can keep working longer if it’s a job that isn’t too taxing as you get older. DH and I are also self employed and can continue to run our business for many years and can just wind back our involvement as we get older. You don’t need to hit a wall where income goes to 0 overnight.
3. Being self employed does give you the opportunity to work elsewhere as well, or do other things. Don’t be grand about it, even lower paid jobs a couple of evenings or days a week and just put all that earnings straight off the mortgage or into pension/savings.
4. Be ruthless about your spending - check out you’re on the best deal for insurance, phones, internet, everything. Check with your local Industry bureaus about whether there are any grants you can get for bits of your business. We got a chunk of money towards R and D and also towards building our website. The old Department of Trade and Industry can also help you with contacts, advice, way more than I expected.
5. Look at your luxuries - what are your spends on holidays, car etc? Shaving here is normally quite easy. Eating out once a week? Make it twice a month instead. Do a careful budget and take the savings out first and then see what you’ve got left at the end after your fixed costs.

Well you have 20 years, which is quite a long time, so crack on with it while your health is good.

See some financial planners

Up your hours - if you can’t work more hours at your job get another one. Unless there’s something wrong with your health or you have extensive care responsibilities then you can work FT

Reported for.. spending too much money??

They are too old for a LISA. Must be opened before age 40 and can only contribute until age 50.

I’d agree.

op, the way it works is people pay into their pension. They save what disposable income is available over and above this and all their bills and fun money

you effectively spent your pension on house, and I assume a lifestyle element.

the fact you’ve spent everything you have, and have no savings or pension,when close to 50, is a risky decision.

but it is fixable to an extent. You should have some savings behind you, and you need to pay into a pension. Costs are only going to get higher over the next 2 decades, so the money you will habe available will be worth less to you. Assuming you can start to contribute to a pension

In addition, with kids, it is really important to try to have some savings behind you. What happens if one of you gets ill? Or one of the kids and someone has to stop working. Or if one of your businesses fails or declines.

its a very precarious situation financially. Yes lots of people don’t have savings or a private pension, but generally that is due to low income for multiple reasons, not financial mismanagement.

It sounds like you have plenty of options

Save lots/downsize at some point/ start paying into a pension

So I am not really sure what the worry is. If you can earn that much from your job you surely have the skills to start reading up on pension planning

Another option many take is to move into public sector work (NHS/civil service/local govt) as these have very generous pension schemes. They work out particularly well financially if you are later in your career too.

Sadly not. My dad works in a high earning self employed profession and says so many he knows have big fancy cars etc and all the trappings of a wealthy life but no savings /pension savings (in some.cases.they even rent their homes).

It just means you're going to have a bit less spare cash over the next 20 years. Pension savings are tax free so start to stash away as much as you're able and maybe try and overpay your mortgage when you can.

An independent financial advisor might help you to consolidate your thoughts and what you do next.

@Sureaseggs44 Yes - exactly like every other pension...? Unless that was your point, sorry. The OP will be able to draw up to 25% tax free and then receive a monthly income for life, which is taxed like any other income; the less they draw in a tax free lump sum, the higher their monthly income will be, but that income is taxed, so ...it will all depend on her circumstances when she comes to retire.

@theduchessofspork@Peasnbeans Indeed. I don't think this is a troll thread. Yes the OP is in a fortunate position in that with hard work and commitment she can still probably get to a good place for retirement, but if you don't know about or understand pensions, as she has explained she doesn't, why wouldn't you be asking the question?

And OP is 48 not 40. It takes most people all their working lives to get to a decent place for retirement, of course it's trickier if you start later.