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?

Have you been paying the right National Insurance payments to even get state pension. ?

check it out on the .gov website and if you havnt even got that, then you both need weekend jobs to earn enough to catch up the back payments. Start this now as you can only go back a few years, I think only 6.
so you will only get 20 ish years contributions to state pension.

have you not had this advice from your accountant??

1. You have a very significant income compared to mortgage costs, start saving. Aim for at least a couple thousand/month. Seek a few financial experts to guide you as to what to do with that money. Think longer term investments but not risky ones due to your ages.
2. When it's time to retire, maybe in 15 years, you may need to sell and invest the money left over from your sale that wasn't used to purchase a smaller property.
3. If you only work PT look at getting another job to make up the hours. Maybe something that is less demanding but still stable income.

I agree with PP you have been coasting along with an additional 10 - 20% income that should have been spent on pensions and NI.

Do you even have enough NI contributions for state pension? That would be my priority.

Then get a second job to push yourself up to FT hours and siphon as much as you can into a pension.

If you can save £2k a month, anticipate working for another 10years at least and are sitting on a large asset in the form of your house, you will be more than fine and a lot better off than many.

I'd highly recommend you speak to a financial advisor to make the best investment with that £2k a month. It will make you feel a lot more reassured.

As people have said, you seem to have spent your pension on your house.

When we looked at mortgage affordablility we factored in pension contributions.

I have a financial planner, rather than an advisor, and I think speaking to one of those would be helpful for you and your husband, OP.

Start now. You could whack in a few hundred a month maybe and it will grow hugely over next 20 years. Also - plan to sell your house, downsize and use left over equity to fund retirement.

Move to a cheaper area of the UK after retirement?

Anything over £50k salary and you're paying 40% tax. If you pay that extra £10k in to your savings it's tax free! When you retire every £100k in the pot gives you approximately £4k a year for life. That's on top of the state pension. If you could put £10k away each a year it's only actually costing you 6k, do that until you retire and you'll be fine.

It seems odd also you are part time becuase there isn't more work. Can you not grow your business? If not l, you could get a second job. Working part time when you don't have to is a luxury you cannot afford with no pension provision.

One of the issues you have is as self employed people you have missed out on employer contributions. Workplace pensions are good because your employer pays in as well.

Youve got 20 odd years before you retire, plenty of time to pull it back.

You and DH earn a decent amount of money.
£100 a week into pension each - 10400 a year over 20 years- £208000?

You'll downsize when you don't need the office. Youve estimated that at over £200k freed up.

You've got a £60k inheritance coming. Save half? 30k
208,000
200,000
30,000
£438,000 - not taking into account that you could invest it which could increase the value, or interest that it will attract, or what is already saved.

£100 a week should be absolutely doable on your current income. If not, see why it's not and address your outgoings to see what you can realistically pay but it's what DH and I pay in on less than you earn.

It might hurt now, but old age should be more comfortable, when realistically you shouldn't be worried about money.

@Mamaraisedadoughut they need to be saving nearly 3 x that, more like £250-300 a week each, or £15k a year each.

That would get them a joint pension pot of £600k plus whatever it earns, so probably a joint private pension income of about £30k a year, assuming they retire when OP is 68. Not masses when you take into account inflation but a realistic thing to aim for at this point.

They may need to set the money from downsizing and inheritance aside for eg care, any family commitments etc, so I think better not to bank on those when saving is an option still!

firstly what will you need to live on as a pensioner you will be mortgage free by then, as you are both working you will both get full state pensions currently this is about £10,000 a year each so £20,000 for two ( this is below tax threshold)
firstly as self employed you already mentioned you have savings for tax that can't be touched -- it 's not really savigns its future bills. In your postion with no sick pay etc you really need a 6 month living expeeenses saved up as an emergency fund before you save for anything else
if you as suggested can put £2000 a month aside for savings i would suggest £500 in savings and £1500 in pensions 1500 a month for 20 years is 360,000 plus compound interest even assuming modest growth of just 3% this will be 492,000 in 20 years time and would give an income of approx 22,000 or 11000 each
so with this and state pension you would both have 21k before tax after tax it would be about £1600 a month or 19k per year so a total of 38K after tax plus any money from downsizing will be a savings pot for holidays cars and extras.
I think 2 people with no mortgage can live quite comfortably on 38k or £3200 a month

£1500 x 12 x 20= 360,000 with compound interest of 3% that is 492000
492000 would give a lump sum of approx 122,000 tax free ( max 25% of pot) and 21,000 a year on top of state pensions.

I’m just catching up on replies.

House is now worth circa £500k. We can downsize on retirement to an apartment for about £250/£300k.
ideally I’d avoid this, as I really want to pass as much as possible on to our children. But

We have both always paid NI (even the years I had off with babies) so we will both get full state pensions.

We both plan on working until at least 70, assuming we’re both still able. Both have desk jobs and WFH so physically we will be able, let’s hope mentally too. I enjoy working, so the thought of working longer is not scary, it just depends how realistic as healthy is unpredictable!

We both have life insurance in excess of the remaining mortgage.

This is not a ‘piss take’ I’m closer to 50 than 40 and I’m really scared for the future! What on earth about this makes you think I’m a troll?!?

We don’t have flashy cars but we probably do overspend on holidays and the children.

I know our situation is precarious, which is why I made this post. I’ve found some really good advice on here and I’m very grateful.

I’m now going to sit down and work out our monthly outgoings and see where we can make savings

Consult a professional independent financial adviser.

40s is the age you should be relaxing a bit? Not in my experience - that's the age you're ramping things up work wise if you've had kids and they're getting less dependent. Piling money into your pension, maybe putting money aside for kids' uni costs too. Some people still have very young children in their 40s and are right in the middle of high childcare costs and very dependent children. "Relaxing a bit" for them is waaaaay in the future.

I’m very grateful for the advice on here. Thank you all for taking the time to reply to me.

I’m also going to email my accountant re the £10k pa I may be able to do for year 23/24 before the year end.

I have no child care costs at present, as I work 3 days spread over a week, so am there for pick up / drop off / clubs / illness / etc.
if I work more hours, we’d need to balance the income against child care costs to see if it made sense.

Go on less expensive/fewer holidays. They can still be fun, you don't need to deny yourself completely. Holidays take up a LOT of our spare money, but we can afford it now we're in our 50s and our pensions and savings are good. When we were skint many years ago we went on very basic holidays - a week's self-catering in Devon and took picnics out with us instead of cafe lunches. We still have great memories of those holidays. So if you want to plough loads of money into your pension you'll have to live within your means for a few years, prioritising pension payments.

@Cottagecheeseisnotcheese

That seems massively achievable!! If both DH and I do that it would be £42k per year plus state pension, we’d have a very happy life on that amount! With no mortgage and no child costs, that would be ideal. We wouldn’t need a lump sum, so could reinvest. I actually feel hopeful!

@HurricaneZeldaAndToto So good to hear. It's such a wonderful feeling when you lean into something you've felt anxious about and realize there's hope there. A huge weight off your mind hopefully and a future to look forward to.

@laclochette your advice has been fantastic and I’m feeling much more positive! Thank you! 💐

@HurricaneZeldaAndToto I think saving 3000 a month between you is unrealistic as you have ongoing costs and you are not going to want to be superfrugal for next 15-20 years, you can get an online compound interest calculator
you can't put all your savings into a pension as you will need to replace cars, maybe help with livings for your children at university and also you may need to work less as getting closer to the retiring age,
I would use a combination of pension, ISA's and a relatively short notice access savings account as you need some savings accessible
once you have decided what to save per month direct debit that immediately just like you do the money for tax you save better if you put away savings first then withdraw if you absolutely have to rather than waiting until end of month to save what is left

for the vast majority the cost of living goes down when you retire

@Cottagecheeseisnotcheese Yes... ultimately only the OP can say what she and her DH can afford to pay into a pension vs eg more immediately accessible savings each month. It is definitely good advice to build up an emergency fund of 6 months' living expenses in easy access cash.

However, on two salaries of £60k, after £2k mortgage, OP and her husband still have a collective £5400 a month. That's a good whack to play with, and I also think she could look at getting part time shift work and put all of that money into a pension/emergency savings etc. So there could be an extra bit of dosh to play with too.

Ultimately only a financial planner will really be able to advise on the overall best approach with all the data in hand.

For an annual salary of 60k, the take home pay per month is 3717 (after tax and NI)

So with both of you on a salary of 60k, take home pay per month is 7434

(Ref: www.moneysavingexpert.com/tax-calculator/)

After paying mortgage of 2k, you will have 5434 per month.

You state pension age will be around 67 years, and based on what you’ve said in your OP you will be mortgage free by then (considering no unfortunate changes in circumstances)
(Ref : www.gov.uk/state-pension-age) 

Most people typically have a target of having around 50% of their income during retirement. So let’s consider your target income is 30k.

You will get around 10.6k as state pension. So you need to have a pension pot that gives you 20.4k a year.

To get 20.4k a year in retirement, you need roughly 510,000 in the pension pot. (The calculation is target salary * 100/4)

(Ref: www.businessexpert.co.uk/pension-pot-size-to-retire/#:~:text=You%20can%20use%20a%20rule,pension%20pot%20of%20%C2%A3750%2C000.) 

You can use this calculator to calculate how long it will take you to save towards your goal.

https://www.moneyhelper.org.uk/en/savings/how-to-save/use-our-savings-calculator

Given you have a high income, you should be able to achieve this goal if you save/invest carefully

Hope this helps, and all the best :)