May

12

do you think about retirement?

Filed Under retirement | 21 Comments 

I’m in my late twenties, so it’s about 40 years until I hit state retirement age, and it’s more than 25 years until I reach the age at which I can withdraw any of my pensions. I don’t often think about what retirement might be like, or whether I’ll be able to afford it.

I do have a little spreadsheet, that tracks my pension contributions, and investment balances and gives me an inflation adjusted projection of my retirement income. (What can I say, I’m a spreadsheet geek.) It’s currently suggesting that I’ll be ok to retire when I’m 68. I’ll be rich enough to have an income that’s about what I have now, assuming that I’ll have paid off the mortgage by then.

I do put a reasonable amount away that’s earmarked specifically for retirement - currently around 11% of my gross salary. My combined investment amount this year is likely to be around 16%-17% of my gross income. This is marginally more than 2007, and I’m hoping to increase it more each year if I can.

The rule of thumb is to contribute 10% of your income, and although I’ve had a pension since I left Uni, I’m not sure when I started contributing more than 10%. But then, I don’t know if 10% is going to be a good rule of thumb for me. I’m pretty sure that you’re supposed to start with what you want retirement to look like, and then work from there, but I honestly can’t really imagine it.

I’m not anticipating taking early retirement. Compared to many of my m-network friends I have quite a conventional career/life thing going on. David @ my two dollars works for himself in various online ventures, Mrs. Micah has a patchwork career, being frugal and paidtwice are both pro-bloggers/SAHP/loads of other great suff, Patrick @ cash money life, pinyo @ moolanomy, gibble @ gather little by little, single guy money, and the doughroller are all heavily into alternative income (or have aspirations that way). I’m just well, me.

If things continue as they are for me, I’m likely to work (at a job I like) for a number of years, and then just retire when I can afford to. Pretty traditional and conventional. I absolutely don’t mind this at all, it’s just that without envisaging a kind of semi-retirement, it all seem such a very long way off. I am likely to be at least twice the age I am now when I retire, after all.

Because I’m sensible, and because I have no intention of being a poor old person, I’m dutifully putting away a good proportion of my money into retirement. Only enough that will do for retiring at 68 though. I just can’t get excited enough about retiring to work harder on it.

What do you think? Are you working towards early retirement or semi-retirement? Or are there other conventional people like me out there? Let me know in the comments.

Image by Tracy O

May

9

could you afford to lose your income?

Filed Under insurance | 8 Comments 

Insurance is a pretty boring topic, and insurance salesmen are the butt of many jokes. Like many boring things though, insurance is eminently sensible as long as you do it right.

I’ve been reminded lately about the importance of insurance, as I’m suffering a little with my left hand/arm/wrist (I’m a leftie). It’s making it uncomfortable to type, and of course typing is what I do practically all day both here, and in my day job.Although I know that my discomfort is caused by a specific event, a chronic condition like RSI would have a very detrimental effect on my ability to earn an income.

For most people in the pre-retirement stage of their lives, losing the ability to earn is both financially damaging and more likely than you might think. It’s not often self-insurable (if you don’t need to work for money, then you are self-insured, otherwise you are not), but you can and should consider taking out both short and long term disability insurance, also known as income protection insurance to cover you against such an unfortunate event. You might, however, not need to pay for it yourself.

My employer has just introduced a new benefit, which is Group Income Protection that pays out 50% of pay (minus any other income received) after 6 months of sick leave - during those 6 months you are still employed on full pay. I’ve already got a income protection plans in place, and now I’m not sure whether to cancel. I suspect that having two policies won’t net me any more money, but it’s possible that one could have less stringent requirements than the other.

The question is, should I cancel my own policy, and just rely on my employer’s policy? Or should I keep paying out £26 a month, for my own cover?

Image by openDemocracy

May

7

make choices without being constrained by finances

Filed Under philosophical | 8 Comments 

So, the other day I was talking about how if you’re a stay at home parent, you need to do things to mitigate the financial impact of that choice. It’s not a choice that everyone faces (and I’m one of the people planning to avoid permanently). But, it’s an example of a wider principle.

There are lots of choices that we make that are chosen for reasons other than finance. We might decide to live in a certain location because it offers the social environment that we want. We might decide to get have a big party when we get married, because we want to celebrate with all our friends and family. We might decide to have children. We might decide to switch careers, because we don’t like the job that we do. The list is endless.

I hope that most of your big choices are not made primarily for financial reasons. I hope that you choose to live somewhere that you like living, I hope that you get married the way that you want to, I hope that you have a job that you enjoy, I hope you have children or remain child-free without being burdened by the financial costs. I hope that you aren’t forced into major life choices simply because you cannot afford your preferred alternative.

On the other hand, just as there are financial downsides to being a stay at home parent, so can there be to our other big choices. Living in a nice area is expensive in a continuous and ongoing fashion. Throwing a big wedding will probably cost thousands and thousands of pounds. Not every fun job is the highest paid. Children eat money - well they eat food, and food costs money.

For every choice you make that has major financial downsides, you need to mitigate against them. My mantra is that I can’t have my cake and eat it all at the same time. I choose to live on my own, but that means that I can’t afford a car, so I mitigate by living close enough to walk to work. I choose to travel extensively, but mitigate that by concentrating on budget travel.

If you want to live take a lower paid job, you’ll need to cut back on your expenses, and be willing to devote a greater proportion of your income to savings and investings. If you want to resume your studies, you need to investigate grants, scholarships and bursaries, as well as getting the best possible financial terms on your course. If you want to have a big fat wedding, then you need to save up for it, cut costs where they are not important to you, and focus on the most important elements.

Most choices that we come across don’t have a right and a wrong answer. It’s usually ok to decide either way. Be in a position to do what you really want, by mitigating against all the financial downsides of your choices.

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