How much 'should' you have in a pension at age 50?
- Thread starter spicyone
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I don't think there is a universally "right" answer to this question but I have seen it recommended, as a guide, that you "should" have six times your salary saved by age 50 and ten times your salary saved by 65.
But I would take those recommendations with a big pinch of salt.
But I would take those recommendations with a big pinch of salt.
It also depends on when you want to drawdown, what the market returns will be like between now and then, how much you're contributing on an on-going basis etc.
To least to give you one answer
Let's assume, 65 drawdown, target pot of 2m, you're contributing 1k a month & you get a return of 5.5% over those 15 years. The answer would be approx 750k at 50.
To least to give you one answer
Let's assume, 65 drawdown, target pot of 2m, you're contributing 1k a month & you get a return of 5.5% over those 15 years. The answer would be approx 750k at 50.
Dr Strangelove
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That’s far in excess of the lifestyle needs of a typical person, particularly if you have a contributory pension and a house without a mortgage.
Gordon Gekko
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It is ‘only’ €60,000 a year, in a world where inflation is back on the agenda. Not to be sniffed at, and probably €73,000 in total, but not huge either, particularly if it’s to cover a couple.
It should never be to cover a couple
Dr Strangelove
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Well two people do cost more than one…..
Average full-time earnings of workers are around €50k so retirement income of €73k is a multiple of a typical retiree’s income.
Gordon Gekko
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Perhaps. But I suspect that the average earnings of someone seeking advice and/or an Askaboutmoney member are higher.
The key point is that €60,000 a year won’t be worth anywhere near as much by the time the person planning today gets to drawdown their pension fund in the future.
Dr Strangelove
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I agree. But inflation helps with accumulation as well as meaning more of a drawdown.
Gordon Gekko
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Except there’s a cap of €2m which is designed to cap the pension at €60k. The €2m should be index linked as was the case in the past.
Steven Barrett
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I think limiting yourself to just looking at your pension value is incorrect (and that's coming from a pension advisor!), you should look at your overall wealth and pensions is just a strand of that. If you have a small pension but a load of debt free investment properties, you will also be in a good position to fund your retirement.
a method of assessing your wealth is age x income / 10. If it's a couple, do the calculation for both and add together. deduct any inheritance from the calculation.
Steven
www.bluewaterfp.ie
a method of assessing your wealth is age x income / 10. If it's a couple, do the calculation for both and add together. deduct any inheritance from the calculation.
Steven
www.bluewaterfp.ie
Gordon Gekko
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For what it’s worth, I find it more helpful to work out my requirements excluding debt and retirement provision in today’s terms and then applying an inflation rate to that to work out what I think I’ll need. Then build in some fat, then work out what’s needed to deliver that.
coolaboola12
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most of these calculators talk about having a pension pot so large that you can have a safe withdrawl rate and the fund itself will last forever. I dont see the point of this, no one will live forever and you would end up leaving a massive amount of money after you
time to plan
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As always you have to look at the big picture of your total pension entitlements. As an example, in my case, I only started paying into a pension at 50, but am piling cash in at 42k per year as a proprietary director. I won't be fussed about a safe withdrawal rate as the big picture is that my wife amd I both have UK and Irish state pensions, I have a small but not trivial NHS pension and my wife has a similar UK University scheme pension and is now building up an Irish public sector pension.
So if I end up over-withdrawing on my pension fund, the impact of it is not catastrophic as it could be on an individual or couple entirely reliant on it and an Irish state pension.
Blackrock1
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what do you mean Steven? are you saying if you are 40 and earn 200k you should have 800k in assets or am i misunderstanding?
Would you include equity in your home as wealth? Or just pension and any investments?
Steven Barrett
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That's correct. It is a rule of thumb from The Millionaire Next Door.
Age x realised pretax annual household income from all sources except inheritances. Divide by 10. This, less any inherited wealth is what your net worth should be.
To be well positioned PAW (prodigious accumulator of wealth), you should be two times the expected level of wealth.
The book doesn't say specifically but I include the net value of your home. I know some people exclude the value of the home when assessing net worth as you need somewhere to live.
At the end of the day, it's a largely meaningless exercise when viewed in isolation. Your spending habits and what you want to do in life also has to be taken into account. You have 4-5 kids that will leave home for 3rd level and you want to help them get them on the property ladder as well as you wanting to retire early, buy a holiday home etc. That's going to cost you a lot of money and the big pot you have may not last as long as you think it will.
I find if people have good saving habits throughout their life, they do alright. Make pension and savings automatic and don't get into too much debt.
Steven
www.bluewaterfp.ie
Steven
www.bluewaterfp.ie
Steven Barrett
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It used to be multiply it by 20. It's changed now and you multiply it by a factor depending on what age you retire. Doesn't really reflect the true value of a DB pension but then, you can only know the true value of it based on the annuity rates in the market at the time of retirement.
