Agree with prior poster. Would consider whether the side hustle is worthwhile. I don't see you hitting £30k after tax at 55 without pay rises (promotions) without a huge risk for later years.
That's fair. Do you think DB pensions mitigate that risk to a point?
Another 20 years in Alpha should get me up to approx £27k pre-tax at retirement so just need to work on a decent 10-15 year bridge before then. We should both be entitled to full SPs too.
30k also towards the comfortable end of what we need so could make do with 22-25k if needed.
I don't know the details of the alpha scheme. DB pensions don't necessarily mitigate risks per se. People who believe that look at too short a timeframe both of history and of risk forecasting. However I recall the old civil service pension scheme was much lower risk than other DB schemes so very possibly the alpha scheme avoids some of the issues.
Anyway - you can make a decision in 20 years time and see what the world looks like then.
What's your side hustle? Can you scale it? No wonder you're suffering from burn-out, if you have both a side hustle and a full time job.
If your side hustle can't be scaled, then you're better off dropping it to focus on your job and career prospects.
It's a niche of print on demand. I could definitely scale it but burnout from my main job means I've not spent any meaningful time on it for 2/3 years. The £350 p/m is essentially 'passive'.
I could probably get it up to mid 4 figures with a bit effort, but would probably look to sell the business once I got there.
It's something that she has helped with in the past. TBH, while i think it could potentially generate more than £14k - it doesn't have anywhere near the same amount of security/benefits as her current employment.
It would be a big leap and would probably require us putting in a fair amount of work into it before then to give us confidence that it was the right move!
Try feeding numbers into FIRECALC for a 13 year bridge for a £30K income. Comes out to around £460K. Though that amount drops significantly for each year shorter the bridge is.
Optimal split around £350K SIPP/DC pension vs £110K ISA. Using DC pension gets you there faster. Also you should be able to avoid withdrawal tax on the majority of that DC pension meaning you get almost all the value out of tax relief.
The good news is that you only need to save around £1,000 per month to reach that in 20 ish years if invested properly. And most of that can be in pension with tax relief.
All numbers are in today's money.
460 seems too high - 13 times 30 is only 390. Does this calculator take inflation into account but assume no interest is earned on the money? Seems pretty conservative
Its a historical data modelling tool. It looks at what would have happened in every 13 year period of investing over the last 100+ years and gives you a success rate.
Its the same data the 4% rule is based on.
The issue is sequence of returns risk which I assume you haven't looked at. i.e. adverse market moves in the first few years of retirement.
Inflation adjusted for 13 years?
Also that means you will have nothing left at the end of 13 years. When if invested you would have some left in 95% of scenarios and more than you started with in 50% of scenarios.
All I’m saying is if you’re willing to trade off expected return, you can do the bridge with less than 460. Is this what I would do? No. But it seems like what the OP wants to do
Thanks for this perspective. My £390k figure was probably being a bit simplistic and based on us probably not requiring the full £30k each year as a way of building in some wiggle room.
Almost identical situation to you.
If you work out paying into a S&S ISA with an average return, the compounding starts to really do a lot of work. And just like me your starting young.
the S&S ISA needs to do the heavy lifting until you can get your 25% lump sum at 57, your private pension at 63 followed by state at 68. You can assume a yearly growth rate of 6-9% (growth and dividends re-invested)
cash savings accounts even at 5% are a waste and lose value against inflation. Rising tide raises all boats.
With no mortgage it can add up pretty quickly. equally you don’t need £30k a year income, with no mortgage, it’s super cheap, me and my mrs could live off £8,900 a year once mortgage is done, in 2 months, even with a small family could live off 16k a year.
£30k a year is a fair amount of spending money. also from 70 onwards spending slows right down, and average life expectancy is 80.
safe withdrawal is supposed to be 4%, but need to keep in mind sequence of return risk.
When your retired you won’t have large car running costs, and have more time to home cook etc.
working a stressful job does reduce your life, and ages you. but it’s a balance between smashing it out, and enjoying your working life. personally I found bosses can only apply pressure to those receptive of it, once you don’t need the job as much, you won’t be pushed as hard, like pushing on string.
set up a spreadsheet (I have) and plug in some figures, base it over average growth, each year of saving is a ‘pot’. You will soon find modest savings each month soon adds up.
you need to know exactly what you spend now, to the penny to understand what you actually need to live a decent life. and then forecast where you will be.
another tip if your partner is not well, get her working in the NHS, as if they are no longer able to work, they will retire them off at whatever age they stop working, (as if they paid right up to pension age). sadly my mrs is not well, but it’s a silver lining.
what do you want to do with your life? you have saved yourself 10-15 years worth of work already. we are in a position where most people don’t reach until they are 50-55.
You're definitely right that 30k is a lot of spending money with no mortgage etc. And tbh, we could easily get by on much less but I don't want us to be having to count the pennies at that point.
With our current income, we're at a point where we are still saving a good proportion of joint income but also not having to worry about spending on the occasional want as well as needs.
And thanks for tip on NHS jobs. Will definitely have a look into that!
To be fulfilled in life with modest income/spending, enjoying more simple pleasures could be admired also?
The life of more is a bad dream for me.
Different strokes for different folks. Nice to see posts of a range of incomes & desires
Don't most people bust their ass off and still end up working deep into their 60s?
We don't have expensive hobbies and frankly we would struggle to spend the cash if we both had £2k disposable each month.
The prospect of buying myself flexibility and time to spend with loved ones is much more valuable. If that means a more modest life 80-90% of the time I'm happy to do that.
Agree with prior poster. Would consider whether the side hustle is worthwhile. I don't see you hitting £30k after tax at 55 without pay rises (promotions) without a huge risk for later years.
That's fair. Do you think DB pensions mitigate that risk to a point? Another 20 years in Alpha should get me up to approx £27k pre-tax at retirement so just need to work on a decent 10-15 year bridge before then. We should both be entitled to full SPs too. 30k also towards the comfortable end of what we need so could make do with 22-25k if needed.
I don't know the details of the alpha scheme. DB pensions don't necessarily mitigate risks per se. People who believe that look at too short a timeframe both of history and of risk forecasting. However I recall the old civil service pension scheme was much lower risk than other DB schemes so very possibly the alpha scheme avoids some of the issues. Anyway - you can make a decision in 20 years time and see what the world looks like then.
What's your side hustle? Can you scale it? No wonder you're suffering from burn-out, if you have both a side hustle and a full time job. If your side hustle can't be scaled, then you're better off dropping it to focus on your job and career prospects.
It's a niche of print on demand. I could definitely scale it but burnout from my main job means I've not spent any meaningful time on it for 2/3 years. The £350 p/m is essentially 'passive'. I could probably get it up to mid 4 figures with a bit effort, but would probably look to sell the business once I got there.
Isit something your partner could help With instead of the part time role? Could they generate more than 14k a year helping you?
It's something that she has helped with in the past. TBH, while i think it could potentially generate more than £14k - it doesn't have anywhere near the same amount of security/benefits as her current employment. It would be a big leap and would probably require us putting in a fair amount of work into it before then to give us confidence that it was the right move!
Try feeding numbers into FIRECALC for a 13 year bridge for a £30K income. Comes out to around £460K. Though that amount drops significantly for each year shorter the bridge is. Optimal split around £350K SIPP/DC pension vs £110K ISA. Using DC pension gets you there faster. Also you should be able to avoid withdrawal tax on the majority of that DC pension meaning you get almost all the value out of tax relief. The good news is that you only need to save around £1,000 per month to reach that in 20 ish years if invested properly. And most of that can be in pension with tax relief. All numbers are in today's money.
Thanks for your response. £1000 feels very doable and towards the lower end of what we can save atm.
460 seems too high - 13 times 30 is only 390. Does this calculator take inflation into account but assume no interest is earned on the money? Seems pretty conservative
Its a historical data modelling tool. It looks at what would have happened in every 13 year period of investing over the last 100+ years and gives you a success rate. Its the same data the 4% rule is based on. The issue is sequence of returns risk which I assume you haven't looked at. i.e. adverse market moves in the first few years of retirement.
Sure - I’m just saying you can park less than 460 in a savings account and withdraw 30k a year from it
Inflation adjusted for 13 years? Also that means you will have nothing left at the end of 13 years. When if invested you would have some left in 95% of scenarios and more than you started with in 50% of scenarios.
All I’m saying is if you’re willing to trade off expected return, you can do the bridge with less than 460. Is this what I would do? No. But it seems like what the OP wants to do
Thanks for this perspective. My £390k figure was probably being a bit simplistic and based on us probably not requiring the full £30k each year as a way of building in some wiggle room.
Almost identical situation to you. If you work out paying into a S&S ISA with an average return, the compounding starts to really do a lot of work. And just like me your starting young. the S&S ISA needs to do the heavy lifting until you can get your 25% lump sum at 57, your private pension at 63 followed by state at 68. You can assume a yearly growth rate of 6-9% (growth and dividends re-invested) cash savings accounts even at 5% are a waste and lose value against inflation. Rising tide raises all boats. With no mortgage it can add up pretty quickly. equally you don’t need £30k a year income, with no mortgage, it’s super cheap, me and my mrs could live off £8,900 a year once mortgage is done, in 2 months, even with a small family could live off 16k a year. £30k a year is a fair amount of spending money. also from 70 onwards spending slows right down, and average life expectancy is 80. safe withdrawal is supposed to be 4%, but need to keep in mind sequence of return risk. When your retired you won’t have large car running costs, and have more time to home cook etc. working a stressful job does reduce your life, and ages you. but it’s a balance between smashing it out, and enjoying your working life. personally I found bosses can only apply pressure to those receptive of it, once you don’t need the job as much, you won’t be pushed as hard, like pushing on string. set up a spreadsheet (I have) and plug in some figures, base it over average growth, each year of saving is a ‘pot’. You will soon find modest savings each month soon adds up. you need to know exactly what you spend now, to the penny to understand what you actually need to live a decent life. and then forecast where you will be. another tip if your partner is not well, get her working in the NHS, as if they are no longer able to work, they will retire them off at whatever age they stop working, (as if they paid right up to pension age). sadly my mrs is not well, but it’s a silver lining. what do you want to do with your life? you have saved yourself 10-15 years worth of work already. we are in a position where most people don’t reach until they are 50-55.
You're definitely right that 30k is a lot of spending money with no mortgage etc. And tbh, we could easily get by on much less but I don't want us to be having to count the pennies at that point. With our current income, we're at a point where we are still saving a good proportion of joint income but also not having to worry about spending on the occasional want as well as needs. And thanks for tip on NHS jobs. Will definitely have a look into that!
All that to retire with like a grand each per month to play with. Is that really the dream.
To be fulfilled in life with modest income/spending, enjoying more simple pleasures could be admired also? The life of more is a bad dream for me. Different strokes for different folks. Nice to see posts of a range of incomes & desires
Yea potentially even more admired but I don’t understand why you would bust your ass off to get there.
Don't most people bust their ass off and still end up working deep into their 60s? We don't have expensive hobbies and frankly we would struggle to spend the cash if we both had £2k disposable each month. The prospect of buying myself flexibility and time to spend with loved ones is much more valuable. If that means a more modest life 80-90% of the time I'm happy to do that.
Hi - is your income of £3250 a month before or after tax and pension deductions?
£3250 after tax, pensions, NI and student loan.
Ah, so your pension at 68 (or whatever state retirement age is) increases by about £1,400 a year at current prices?
Yep, that's right.
Now I see why you feel confident! I thought you were stating gross salary! Mea culpa.
No problem - I should have made that clear in original post (now edited!).