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Retirement

davidsrsb said:
What matters more is that a fixed income or inflation linked? You could be facing serious inflation at some point
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Mine's not fixed (not sure about my lady) - but this is the current forecast, and that's based on a moderate growth program, so can easily be a lot less too...
 
Mr Cat said:
I hope so, as we'll have a measly ~£3500 a month pension to play with when I retire... hoping to retire a bit sooner so will have even less.. :(
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Methinks you should stop complaining. That's plenty to live off for anyone.
 
NeilR said:
Methinks you should stop complaining. That's plenty to live off for anyone.
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It depends on how this figure was arrived at and for when. For example this £42k pa in 10 years time may only buy what £27K would today. Thats the power of inflation.

Also I understand that this is the result of two pensions. Today a couple can get approx £15k pa state pension jointly so only another £12K (i.e. £6K each) from a private pension is needed to reach £27K.

As I have said before many people don't take into consideration the power of inflation.

Cheers,

DV
 
Darth Vader said:
It depends on how this figure was arrived at and for when. For example this £42k pa in 10 years time may only buy what £27K would today. Thats the power of inflation.

Also I understand that this is the result of two pensions. Today a couple can get approx £15k pa state pension jointly so only another £12K (i.e. £6K each) from a private pension is needed to reach £27K.

As I have said before many people don't take into consideration the power of inflation.

Cheers,

DV
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Thing is, with inflation, folk want it in their favour re: interest returns, but not in terms of inflation. It is just the same as the way folk bemoan the odds of winning big on the lottery, but whine 'why me!!?' when similar odds land them with some horrible disease.

You can't have it both ways.
 
Mullardman said:
Thing is, with inflation, folk want it in their favour re: interest returns, but not in terms of inflation. It is just the same as the way folk bemoan the odds of winning big on the lottery, but whine 'why me!!?' when similar odds land them with some horrible disease.

You can't have it both ways.
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Mull, I don't think that you understand the effects of inflation and I remember you saying before that you had difficulty with maths so maybe the two are related. About the only people who welcome inflation are those with debts especially big ones over many years such as a mortgage. Inflation has the effect of reducing the original debt. For example if you have £100K cash and stuff it in your bed mattress then when you pull it out in 10 years time that £100K may only buy you £60K of goods at todays prices i.e. you have lost £40K of buying power. However if you borrow £100K say on a mortgage then in 10 years time that debt has effectively reduced to £60K. Thats why during inflationary times the recommendation has been to borrow as much as possible over as long as possible to buy a home as over time inflation reduces your debt and the cost of servicing it.

Inflation is bad for investment returns. At the moment inflation in the UK is at around 3% so your investment has to return that just for the value/buying power to stand still. If you have large investments then you'll also have to pay tax on that 3% so in that case you'll need a return higher than 3%. Look at todays bank interest rates and you'll see that money saved is losing value whilst the banks are laughing all the way to ...... the bank!

If you need a return that gives you capital growth you have to take a risk in the stock market where returns can outstrip inflation. Some on pfm have quoted 20 to 30% return over the last 18 months since the Brexit referendum and that has really beaten the 4% or so loss due to inflation over the same period

Cheers,

DV
 
Stagnating wages in periods of inflation would militate against the diminishing mortgage debt concept surely? Like now.
 
It's because of the consequences of inflation that I feel very lucky to have over 40 years contributions in defined benefit pensions with provision for inflation built in annually. Around 50% of my pension is NHS and under this scheme there is no option to convert to a cash equivalent although I also get a tax free lump sum which is 3x my annual gross pension. The other 50% is in a non-NHS DB scheme which does offer a cash equivalent in the alternative to the defined income. I did consider the option to liquidate this, but have decided I prefer the peace of mind of a guaranteed income along with the inflation linked annual uplifts. The trick is to stay alive long enough to enjoy my good fortune.

I consider myself to be very lucky that I have the luxury that my pre-retirement thoughts are focused on keeping physically and psychologically healthy and to develop non-work activities that will bring challenge, interest, enjoyment and some relaxation.
 
Darth Vader said:
If you need a return that gives you capital growth you have to take a risk in the stock market
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Or buy a property to let, though maybe the horse has bolted on that one with the swingeing penalties foisted on landlords to be. Carillion's demise shows that the stock market is a gamble; especially now at the FTSE's and others' current peaks.

I love inflation; it increases my pensions annually !
 
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Darth Vader said:
Mull, I don't think that you understand the effects of inflation and I remember you saying before that you had difficulty with maths so maybe the two are related. About the only people who welcome inflation are those with debts especially big ones over many years such as a mortgage. Inflation has the effect of reducing the original debt. For example if you have £100K cash and stuff it in your bed mattress then when you pull it out in 10 years time that £100K may only buy you £60K of goods at todays prices i.e. you have lost £40K of buying power. However if you borrow £100K say on a mortgage then in 10 years time that debt has effectively reduced to £60K. Thats why during inflationary times the recommendation has been to borrow as much as possible over as long as possible to buy a home as over time inflation reduces your debt and the cost of servicing it.

Inflation is bad for investment returns. At the moment inflation in the UK is at around 3% so your investment has to return that just for the value/buying power to stand still. If you have large investments then you'll also have to pay tax on that 3% so in that case you'll need a return higher than 3%. Look at todays bank interest rates and you'll see that money saved is losing value whilst the banks are laughing all the way to ...... the bank!

If you need a return that gives you capital growth you have to take a risk in the stock market where returns can outstrip inflation. Some on pfm have quoted 20 to 30% return over the last 18 months since the Brexit referendum and that has really beaten the 4% or so loss due to inflation over the same period

Cheers,

DV
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Well thank you for that DV. I feel so much better now....:rolleyes:

FYI, I might not be a mathematical genius, but there is bugger all wrong with my grasp of arithmetic. And my point was actually about probability.
 
Chaps

Retirement is just another chapter in your life and there are successful retirees who have a good retirement and unsuccessful retirees who are permanently skint and just plod along.

Retirement is like anything else, you have to define your goals, decide what you want, how it will add value to your life and how you will fund it.

We all have different ideas on how we want to spend our retirement. Some just finish work and just take a couple of weeks holiday each year and the rest of the time is spent at home as if it were a long week end. They start off by slowly redecorating the house and then spend more time in the garden and popping out on a bus pass etc etc. I made a decision to spend six months a year abroad and I have managed to do that for the last seven years and have really enjoyed it. It would drive me nuts to stay at home for 50 weeks a year and for me, personally, that is a total waste of retirement.

As regards to the cost of retirement, if you are one of the stay at home type of retiree, then retirement need not cost a fortune, however, travel type retirement is expensive and you need to plan for that years in advance and by that I mean from your twenties. So you have to force yourself to contribute a fair amount into a pension and even if you have an occupational pension, still pour money into something else. No excuses, just do it.

We are all different, but to me retirement is best started in the early sixties, so you need a pension or a sum of money that you can access from 60 onwards. Forget the date of the state pension, that will continue to slide back and back in order to make it worth having. Even when you get it, it is bugger all. The most important thing is to have the pension index linked as you are else really vulnerable to inflation for the next twenty years.

The daftest strategy is to rely on your house as a pension, it never works. What is the point in working all your life to buy the house you want only to down grade when you will be spending more time in it. Also prices will probably soon drop as a few million baby boomers die off and the market is flooded with 4 bedroomed houses being put on the market. Just remember in five years from now, the baby boomer deaths will begin to hit in and the demographics are really going to change and inheritances are going to be soaked up with taxes and nursing home costs. So the house that you rely on for a pension is going to be worth considerably less and you will suffer as a result.

The main thing is to stop thinking about it and plan ahead and, more importantly, act upon it.

Regards

Mick
 
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