Hi all,
I've just joined the forum having read the entire blog since Christmas, and done a fair bit of pootling round the forum too. You seem like a lovely bunch, and I hope you don't mind me working a few things out here. I'd really appreciate some advice if anyone has a few minutes.
I'm just starting to get my head round pensions and retirement savings (I'm 34, and have had a pension for nearly 5 years, not long). I'd like to know whether I should start paying extra voluntary contributions to it, and how much.
I've been playing with MMM's latest blog post calculations
Net worth
I've never even considered working this out before, but here goes:
Assets
£150,000 approx value of house we live in (owned outright)
£39,000 my pension pot
?? partner's pension pot (he paid into it for 22 years so I imagine considerably more than mine! But can't draw on it for another 13 years)
£5400 tax free ISA (we currently add £429 a month to this)
£1000 emergency fund
= £195,400 + partner's pension fund (no idea how to even figure out how much this is, suspect he's lost the paperwork, will investigate)
Liabilities
No mortgage, car loan, credit cards etc
£8000 ish left on my student loan - interest capped at the rate of inflation and I pay back 9% of anything I earn over £16190 (at the minute I pay £84 a month)
= £187,400 + partner's pension fund
That sounds better than I thought!
MMM Take home pay calculation
Gross pay (monthly) = £2350
+ £376 employer pension contribution
- £268 tax
- £176 National Insurance
= £2,281 a month
(actual take home pay that I see is £1645 - also deducted are £84 towards student loan, and £176 as my pension contribution)
Partner's take home is (very) roughly £300 a month
Spending
Monthly bills
£180 my travel to work (£20 a day on train, 2 days a week - cycle to and from station at each end)
£45 house phone and internet
£17 two mobile phones
£97 council tax
£150 gas, electric and water
£21 union fees
£14 partner's national insurance (Self employed)
£45 diesel
£120 my spends (clothes, socialising, unnecessary food etc)
£50 'joint treats' (breakfast in cafe etc)
£30 course fees
£150 ish food (comes from partner's income)
£150 ish partner's spends (I don't keep track of this - he just spends whatever he earns that's more than what he spends on food)
=£1069
Annual bills: amount saved each month
£10 house insurance
£20 car insurance
£5 car breakdown cover
£12 TV licence
£12 car tax
=£59
Monthly savings
£75 holidays
£75 weekends away
£10 Christmas
£10 birthdays
=£170
Total spending: £1069+59+170 = £1298
Savings rate
(take home pay-spending)/(take home pay)
(£2281-£1298)/(£2281) x 100
= 43% savings rate
Although... all we consciously save is £429 into ISA plus £176 into my pension through wages = £605. The rest comes from employer pension contribution £376 ish) - should this really be included in my savings rate?
So...
43% savings rate apparently has me retiring in 20 years - I'd like to do it far more quickly than that!
Some extra things about us
I'm 34, partner is 52. He bought this house 26 years ago and finished paying the mortgage off last year. He worked full time for 22 years, then gave up his job about 6 years ago, and now does cheerful musical things. We're both much happier since he did this!! I spent years doing a PhD and have only been working 'properly' for nearly 5 years - I love my job and don't intend to retire *that* soon, but I also don't want to still be there when I'm 60!
Partner's income is much lower than mine at the minute - but in the past mine was much lower than his. I'm now main wage earner, but he's spent years buying this house which we now share ownership of, and which I'd never have been in a position to start buying myself yet. We're both fine with this situation!
My questions (finally!)
1. Although we're reasonably frugal, I can still see plenty of places we could cut if necessary - should I add the extra savings to the pension pot? I can pay Additional Voluntary Contributions (AVCs) to my pension - up to an extra 15% of my salary, so roughly another £370 ish. That would (I think) take us up to 60% savings rate, meaning I could retire in about 12.5 years. Except I can't draw on my pension til I'm 55 (21 years away). Partner's pension is payable in about 13 years (not sure how much it'll be, he'll get state pension too).
2. Is 'tax free in pension pot' the same as 'tax free ISA'? Sorry, obvious question I'm sure but I'm new to all this... :)
3. Should I pay off student loan? Elsewhere advice is not to bother - interest is capped at the rate of inflation and I'll only ever pay back 9% of anything I earn over £16,190, taken directly from gross pay.
4. We'd like to move house at some point. I've never bought or sold a house, partner had dreadful time with estate agents buying this house in 1990, so we're both a little wary. There's LOTS of work needs doing on this house (some bits still only half decorated, after all this time!!) - I get overwhelmed when I think of all that would need to be done to get it in a saleable state.
4a. Is it ever worth selling a house as a 'project'? We'd be wanting to buy a project too, possibly slightly smaller but with a more private garden. I keep reading MMM's blog posts about DIY but sometimes the sheer amount that needs doing is overwhelming. (We don't live in a complete pigsty!! We're just not that fussed about pristine wallpaper and shiny matching cabinets!)
4b. Would it be dreadful to take on another mortgage for a new house? I'm very much enjoying not having one (even though the previous one was never mine!) It would only be for an extra £30,000 max I'd guess.
Thanks ever so much in advance for your thoughts. I've got my big girl pants on waiting to face up to any face punching I get! :)
