To be super clear, we're talking about sustainable expenditure here. The software takes care of taxes. It's assuming you have no other income or capital gains coming in from other sources other than the state pension, as indicated.
@@ZelenoJabkobecause I imagine the vast majority of people watching this video will get some state pension, and a large percentage will get the full amount.
@@OMGxILoveNo0bx Perhaps not, you can make a copy from here: docs.google.com/spreadsheets/d/19C7lE25wEbcDbODnWIH7WK9B2UBTszlolItBJFwK78o/edit#gid=1103659851
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My Husband and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement
This is true. I'm in my mid 50's now. My wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more. I'm making money even before retiring, and my retirement fund has grown way more than it would have with just the 401(k). Haha...
Interesting. I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation..
I definitely share your sentiment about these firms. When I was starting out, I checked out a couple of freelance investors online, so you could do the same. I personally work with “Teresa L Athas”, and she's is widely recognized for her proficiency and expertise in the financial market. With a comprehensive knowledge of portfolio diversification, she is acknowledged as an authority in this field.
Thanks for sharing. i searched her full name and found her web instantly. After reviewing her credentials and conducting due diligence, i reached out to her.
CORRECTION: At 10:00, I said NI for the basic rate tax band is 10%, but as of April 6th 2024, it has been reduced to 8%. I should really stop filming videos at 10pm at night...apologies for the mistake.
Also, in Scotland the higher tax starts at £42k so the earnings band band between 42 and 50k in Scotland has 42+8=50% deductions a huge mark up for salary sacrifice
@@kykslrthis to me is unconscionable. That's a huge chunk in low middle earners take home pay and many Dont realise it. I try to salary sacrafice below this into pension for now until weans or life events come along. I don't have faith state pension will be anything remotely meaningful if at all by the time we ever retire so better let it grow a bit now for longer.
Loved every second of my watch to the very end. I could really use your help James, I’m 52 and disabled since 2007, still own a small business with $80K in savings. But I'd still love to grow my investments ahead of my retirement.
@@hullbruce Exactly, why I stopped taking financial advise from RUclipsrs, because in reality I end up with a collection of confusing stocks. Whereas, all I needed was a real market expert to have made over $350k in less than 2 years.
Exactly, why I stopped taking financial advise from RUclipsrs, because in reality I end up with a collection of confusing stocks. Whereas, all I needed was a real market expert to have made over $350k in less than 2 years.
@@Jaymilnere Alicia Estela Cabouli is a hot topic among financial elitist in Manhattan. She's gained some reputation especially during covid. All the info. you need to set up an appointment is on her web page.
I just want my money to keep growing faster than inflation. That’s why I’m looking for companies to invest my retirement savings of $250K I have sitting in the bank. I just don’t know the best strategies to use to make solid gains with steady cash flow.
Some financial circumstances, in my opinion, are best addressed in consultation with a financial counselor, while others may be managed on your own with sufficient research.
You're right. A few neighbours and I in the Bel Air area work with an advisor who prefers that we dollar-cost average across different promising sectors rather than making a lump sum purchase. As a result, my portfolio grew by 40% last quarter.
That is just amazing. I've attempted to employ a financial advisor by doing some research on my own, but it's somewhat daunting. Would you kindly refer the people you work with?
"Amber Michelle Smith" has always been on the top of my list..She is regarded as a genius in her area and well knowledgeable about financial markets. I highly recommend you look her up if you want excellent collaboration.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
Post election is one of those things that could really contribute to portfolio growth and vice versa. I've been going hard with my investments this year and have been able to build up to 180k, Are there tips I could apply to help me grow my portfolio even more during this election season?
If you are in cross roads or need sincere advice on the best moves to take now its best you seek an independent advisor who knows about the financial markets. It's better to hire a skilled financial planner especially if you're not one yourself. I hired one, after my retirement pension took a hit in April due to the crash.
How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?
My CFA ’Gabriel Alberto William a renowned figure in his line of work. I recommend researching his credentials further. he has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
I need a way to draw up a plan to set up for retirement while still earning passive income to meet my day to day need and also get charged lesser taxes even while in a higher tax bracket. i want to invest around $450K savings.
Don't put all your eggs in one basket; instead, diversify into different asset classes to mitigate risk. If you lack extensive knowledge, consult a financial advisor.
Another great video James. I'm sure I've told you this before, but you really need to get your videos into schools so that the age group 16/17/18 especially get to see this stuff. (appreciate it's accessible to them through here, but I think giving them a nudge to come look would be highly beneficial) I'm 34 now and really wish I had this sort of advice when I was 18 and just started working. My pension got fairly neglected into my mid 20's, a large influence on this was poor (nonsense) advice from older relatives stating things like "pensions are a scam" etc. Videos like this help to illustrate just how easy it actually is to save for a comfortable retirement if you start early. Thanks Rob
Completely agree. And you're still young, we only properly looked at our finances in our early 50s. Luckily we'd been paying into pensions for years through work but had no idea which funds we were in. We've got ourselves on the right track with the help of RUclips but the best thing is that I've talked about it with my children and started JISAs and JSIPPs and they now understand investing and compounding as teenagers. They're paying small amounts into their ISAs themselves and I see that as a big parenting success!
Pensions COULD be a scam. The government could change their mind tomorrow and "poof" your pension doesn't exist anymore or you can't access it until 80 or whatever.
@@esmeecampbell7396private pensions. Also, pensioners are an incredibly unlikely group to fuck over in a democracy - they vote at the highest rate and generally for the most status quo policies with a bit of selfishness built in
I have spoken to a couple of financial planners to try and work this out. I dont have the data to work out the numbers, but i thought the concepts were pretty straightforward. Neither of them could answer these questions. Thanks for putting it here.
Yes. I've noticed that to some extent already just between 55 and 65. The other consideration is that spending will reduce if one has nobody (partner or friends) to share experiences with. Holidays, meals out, etc alone aren't as attractive as shared ones. Do things while you can.
70 year olds mostly spend nothing ,their Zest for Sex ,Food ,Beer and fast cars has long gone ,as has the desire to travel ..Comfort is the Norm .. I semi retired at 36 and have seen em all .. They all regret not doing sooner . I saw my dad slowly Die of Dementia at 90 ..Crack on whilst you can is what I see on an almost daily basis . Most people dont actually live that long ,so bare that in mind ,as well as the potential for WW3 and UFO ,s that are coming /here ,Not to mention Covid episode TWO ,lol. .. Lots of variables out there other than $$$$$$$$$$$$
@Lookup2Wakeup £2k/mnth before or after tax? I ask as I’m 51 and want to retire at 57. Collect part of my DB pension at 60 and trying to see how much people live on. I know everyone is different. Wife says I should as I have ailments and enjoy it while I can!
@@darrenholden7447Do a few budgets and see how they look. Basic, comfortable, Best Living… Big question. Have you proven to ALWAYS live within your means? If it’s proven you have always lived in debt, take car PCP deals, expensive holidays…then these traits are likely to continue. Old Dog and new tricks….
@@darrenholden7447I've worked out that to cover our bills and do a few nice things like meals out and a holiday or two we'd need about £35k pa post tax. Holidays could be off peak and most restaurants do cheaper lunch specials. Hopefully we'll have our freedom passes so free travel in London (if they're not scrapped by the time we reach 60!) It's the council tax which is so high, all other bills will be quite reasonable once the kids have left home.
Great video James, excellent information! I am state-side and sat down last week and did a year by year retirement analysis to age 95, looking at annual inflation, social security income, personal investment returns, along with reducing annual spending as I progress through my 80’s and 90’s with my spouse. I landed exactly where you did with your approach. Thank you for sharing your insights and analysis, much appreciated!
i was able to think about my situation and I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, I earn around $190K per year but nothing to show for it yet
This is definitely considerable! think you could suggest any CFP for me or better still can I get on the phone with your CFP? I'm in dire need of proper portfolio allocation.
Looks like she really knows her stuff. I also found her online page and read through her resume, educational background, qualifications and it was really impressive.
this is absolutely incredible bc i also get my instructions from this lady, her techmical skill and approach to the market has earned her alot of success , good to know shes also helping others too
i just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. Instead of trying to predict and prognosticate the stability of the market and precisely when the change is going to happen, a better strategy is simply having a portfolio that’s well prepared for any eventually, that’s how some folks' been averaging 150K every week
Hi James, I recently found your channel off of some other financial channels I watch. I am someone (possibly) quite typical in that I am just realising that although I’ve paid into pensions (workplace and private) for some time I may not have been giving it the attention it deserved and at 58 (this year) need to pull the finger out, it’s good to put figures (even if they are ballpark and dependant on returns) to the amounts needed to sustain (in my case) 20 to 30k a year once retirement comes.
Solid video James. I think if people really want to retire comfortably, they need to look at Property too, at least half of all household wealth is sat in Property, those that held onto property the last 2 decades will have seen really solid capital growth. Lastly there is 1 more stream most people forget and that is investing in a business. Most wealthy indians I know in the UK today all have businesses and many retired into their 50s as they did well in business. Consequently they paid off their mortgages and have become portfolio landlords sitting on multiple freehold properties.
A great video with a lot of insights. For me there is this challenge of save, save save and you end up dying 3 years into retirement (all too common story) The balance of living a life you want to live NOW enjoying the things you appreciate more NOW is key. Obviously I am not advocating splurging all of your cash and having nothing for when you finish work I just think each case is different. You don't want to have nice cars, foreign holidays and expensive things when you are 75 so therefore don't need a large amount of wealth at that age
None of this is rocket science, however if you're not financially savvy, it can really appear so. James has a real strength in being able to break it down and explain it simply. The psychology of investment and the ability to sleep at night, which he touches on are super important and these can prevent the "mistakes" he mentions. Good work James.
Don't forget: the government has shown they're capable of messing with or raiding your pension. So far they haven't touched the ISAs - I'm guessing having paid full income tax on it, it's harder to justified scalping it. For that reason, I'm trying to make sure my ISA has close to half of my retirement fund assets in it.
I don't think I will ever retire as such, I have 2 businesses and have taken a few months off in the past but being in contact with people and just doing stuff is really rewarding. Gotta keep moving 👍
You can still be in contact with ppl and very much have a rewarding life without work. Life, for some people, is so much freer and expansive without the construct of work. Taking regular breaks from work has allowed me to appreciate the opportunities for life. I have a wonderful job, don’t get me wrong, but there is a world out there that needs to be enjoyed.
Same here I’m in a well Paid Easy stress free job but they still have my time for 8 hours a day and I hope to get rid of that at 60 and do what I want to do each day.
The Market have been suffering over the past month, with all the three indexes recording losses in recent weeks. My $400,000 portfolio is down by approximately 20%, any recommendations to scale up my returns before retirement will be highly appreciated.
Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.If you're new to investing or don't have much time, it's best to get advice from an expert.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
Great video James! Retirement planning is the real gap since pension freedom. I work in investments and took some free advice from our IFA division recently, all they wanted to do was 'move me onto the platform (with a "staff discount")....all I wanted to know about was tax efficiency, retirement planning and paying into my partners pension as a more efficient way of drawdown in retirement....we spent most of the hour talking at crossed purposes!! I have been looking at 75% (global) equity with 25% spot price gold as a buffer....I know it's not traditional equity bond, but after the truss budget I have less faith in bonds being a buffer any more......have you ever thought of doing backtesting on equities and gold? would be interesting to see........
This video is absolutely excellent James. I can't believe how clearly you managed to explain what is a very complex topic. Edward Tufte would not be especially disapproving of your charts, I think, and that's really helping.
I know that ISAs are not as tax efficient but I have been contemplating having an ISA for income top-ups and to delay drawdown. Essentially buffer plus a big excess. ISA just in case I need money before retirement. Seems like a sound plan in my head
Loved this, clear, accurate and unbiased. You put into words what I have looking at and working towards for the last 5 years. I agree the answer is not straight forward and needs thought especially around the nuances of the related issues like drops in stock market, changing investment thoughts, fees and investment balance. Thank you for this.
Thank you. Retiring at 55 would be a bit of a dream as I’m only a couple of years away but I can at least see that the value of my pension pot which currently feels like way too little isn’t so far away from being enough. Hopefully I can quit before I’m 60 😊
Nice tool it validates my own assumptions of where I'll end up on a conservative 4% interest (My SIPPS rate is 12.42% so defintly on the conservative side). I know what I'm contributing and timescales, it's the goal which is a little fuzzy. I finangled the target in steps to fit in my plan. £257 for 1 year, £357 for 19yrs then up to £530 for the last 14 once my mortgage is paid off. £380K at 68 seems pretty positive when my take home after tax is only 21k. Looks like I'll end up with a choice between more income then when I was working or retiring earlier. Probably a bit of both.
@@christopherjhall It would be nice, unfortunatly I'm not particularly career driven and easily get complacent. My goals have generally been to afford a house & make enough that I don't have to go days without electric or food like I did as a child. It's part of why it's taken 11yrs to get to 26K as I've already got that. Unfortunatly there is also not much in the way of job opportunities locally and my natural skills would have me do well in areas like social care or working with special needs. Areas not particularly known to be a lucritive career path.
You're not saving for "a pension", you're saving for your future self who would otherwise not have that money. When you have the ability to earn, you (should) have the ability to save - now or in the future (even just a little bit) but when (potentially all of a sudden) you're not earning, you're just spending, what your future self might need to survive.
@andrewkemp2238 yes you need to save for your future but the amount you need is crazy amount and that's the problem most of us only see this when 40 and think how do I save £1 million in today's money for time I'm 65.
Go where your savings work hardest for you. Expenses 30%+ less in SE Asia, great quality of life and private medical care, particularly Thailand, Malaysia.
That's a bit sad unless U really want to live there. U gonna leave your grandkids behind and move to Uruguay because U didn't save enough to live a decent life in the UK?
@@FlorinVZahariabit sad trying to tell other what they should or shouldn't do they may not have grandchildren and they may have great savings but it will certainly go a lot further in other country's could take the family with them the uk lost its way a long time ago and is only getting worse anyone able to should leave while they can this country is not great anymore it is a cyst pit of utter bs soon as I retire I will also be out of this country as quick as possible
Could you do a video like this for those of us looking to retire in our mid-late 40's ? as the calculations seem far more risky when there are many years before we can access any pension benefits.
You have produced some very informative video's James, which should help pretty much anyone to reconsider what they are doing with themselves. I think healthspan information wrapped into your current content would further focus your viewers attention, if indeed you have not convinced them already! :-) Apologies if this is elsewhere. Thankyou for your efforts.
Hi James, Great video again. I can't seem to get the How much to save tool to either download or send to an email address. Perhaps it's just me. Keep up the good work.
Thank you for for bring up this video! Recessions are an unavoidable part of the economic cycle; all you can do is prepare for them and plan accordingly. I graduated into a slump (2009). My first job after graduating from college was as an aerial acrobat on cruise ships. Today, I work as a VP for a global corporation, own three rental properties, invest in stocks and businesses, run my own company, and have increased my net worth in the last four years.
Gloriously simple. Well done James. That tool looks like fun. I'd love to know what the spending of pensioners who own their own home is by year. At 65 you need £blah. at 75 , etc. I always imagine I'll spend very Little but “assumption is the mother of all mistakes” .
I don’t understand the assumptions behind the DC Pension figures at 09:17 - given that dividends will accrue and compound tax free in a pension, and that 25% can be withdrawn tax free, I don’t see how you can require more assets inside a DC pension than in a GIA to permit the same expenditure? Even when the pension tax free cash is exhausted, withdrawing funds from a DC pension is no less tax efficient than drawing from a GIA?
@reavsie1 got it, thanks - I see why it's so marginal now... there's a higher income tax allowance than the CGT allowance, but on the other hand there's a lower 10% starting rate of CGT.
We have paid into private pension, not huge ones at that, but since we have started to claim our state pension we are taxes to the point where any increase in the state pension is swallowed up in extra income tax.
It destroys it which is why it was not included. The reality is that you can only hope you run out of time before you run out of money. Those on the higher end, with 50k per year can just about support one individual requiring care. But if you are a couple, then your significant other has no income for retirement, or worse they also require care and you need to sell off your assets either way. You would require an income of 100k per annum matched with care home inflation fees to avoid this scenario. This is not feasible for many. *To clarify, this is for care home assisted living. For private carers to visit your home it is somewhat more manageable, but it would still require a great amount extra, although not double. It’s made somewhat easier with Disability Allowance etc.
Hi James great video as usual, a spread sheet of the first part would be good. I have a few comments, if you have a cascade of pots the net effect would surely mean you need less, as per your other vids you could dynamically draw down? Re pension, if you lucky your company will add their NI savings, for anyone worried I believe salary sacrifice pension is the best vehicle to get to the big numbers, but important is to check for yourself how you pension is invested. A theme you keep touching on are care home costs which could be relatively biblical, how should one think about this, a bit cliche but it’s a concern a long term frugality might be swallowed up by care fees, what are these scenarios likely to look like?
7:20 presumably to get the reduced capital you’ve also accounted for the full £20k/yr needed from age 55-67. However, did you include an amount of money you need per year to pay into the state pension until 67? My works pension forecasts were scarily bad. If I retired at 62 it was going to pay out 12k per year. Felt pointless. More so as my target retirement was 55, with my mortgage paid off by then. I’m more than happy to live frugally before or after retirement. But I feel the pension was a rubbish way to go; I’d need an investment, and not just a lottery gamble on stocks.
Hi James. Great video and particularly useful for us as the scenario you use as an example closely reflects our circumstances. What would be really useful is if you could expand on the pot size details for a married couple retiring at 62 with disposable incomes of £30k/£40k/£50k (including state pension). TIA (if you don’t ask etc etc 😊)
Best video out there to show much much u actually need. Thank you for making this video, makes me feel reassured I’m on the right path and will give me confidence when I reach 55.
Thank you for such succinct description. As an NHS employee is there any chance you could do an in-depth look at the old pension they had and new one CARE and how it maybe feasible to reduce it to 65 retirement instead of Gov retirement age? How it maybe possible to boost it. I know a vast amount of people who would be interested as the calculators on the sppa website aren’t always working and the statements are not clear or continued when old portion of pension taken but CARE left in to take later. Many thanks though for all the videos you do. Very much appreciated
Another quality video 😊 Its a shame we cant cover every eventuality! As nobody's guaranteed govt pensions now as the age is getting further & further out of reach ...im mid 50s ' not the best health now and to expect to live into my 70s and receive a state pension @70 now is pretty unrealistic. My grandparents & parents never made it to 70 😮 Genetics & luck is needed ! Whilst iv saved €200 k for when im 60plus its a pipe dream for many to reach thus age ! 🙏
Not advice but I would seriously consider withdrawing your 25% tax free at 57 & putting it various length cash Isas inc a no or short penalty free access one 👍
A good addition to something like this is - how much money would you need, and need to be investing per month at 20, 30, 40 years old to reach this. I know how to work this out myself but it’s mind blowing when you see it spelled out - the power of compound growth and how little you need if you start early vs late. I still have colleagues in their 20s who have OPTED OUT of our employer pension!
thanks James, very informative as usual and much appreciated. You mentioned briefly about the potential very high costs of funding healthcare in later years. I presume that this would have massive and dominant impact on the calculations, is there a reason why you don't take it into account? Many thanks!
Originally, I thought that there are too many additional assumptions related to end of life care that it would be hard for people to relate to. Length of care? Both going into care? What types of care? Are you happy to sell your home? Where do you live (affects costs a lot)? We have default assumptions for our clients, £80k per year for 5 years before they die. But I think I would have to spend 5 mins justifying those assumptions! However, on reflection I should probably have just showed one scenario and then rolled it back and continued on without it.
10:08 I thought I had a handle on the calculations, but I can’t make salary sacrifice be worth that much (the £1724 column). Isn’t the sacrifice coming out of the band you only pay 2% NI on? Is this relying on the employer adding their 13.8% saving to your pension? (My employer is in the process of introducing salary-sacrifice but is keeping the saving for themselves)
Also your asuming that there will be a state pension and triple lock will continue, which lets be honest the country can't afford, with a reverse pyramid of population and age groups and lower birth rate. I think anyone retiring after 2050 should start to question if UK state pension will be as generous or at least become means tested.
Yes but I would say people were saying the same in the 1990s when I was in my 20s, so I planned accordingly. So agreeing with your point is helpful regardless if it comes true or not. There are other issues you are ignoring, like the voting patterns of retirees.
Hi James, I’m confused by two specific figures in this video. Perhaps you could clarify please? At 2:10, you calculate/estimate 8.3% annualised returns over the last 10 year period for a 60/40 stock/bonds split, but at 13:50 the slide shows the same 60/40 investment split delivering only 6.6% annualised returns over 10 years (although that’s from 1973). What am I missing? Which figure should we consider the ‘guide’? Your help is appreciated. Good video!
I've just stumbled across your channel James and have watched a couple of your videos. I wish I had taken retirement planning seriously 30+ years ago. I have a few small work pensions but these will add up to bugger all in the grand scheme of things. It is only in recent years that I have invested seriously in a share ISA, which is my main pension vehicle. One thing on many people's mind is IHT and the burden this could leave on our loved ones. This has not been mentioned in retirement planning videos, but surely it is something that also needs to be considered and planned for in the same conversation, right?
Unfortunately, I'm not able to download the savings calculator. I enter my email and it says "Your download should start shortly" . I have tried different devices and browsers. I was already signed up for your newsletter James, will that make a difference? Saying that I tried another email and still no downloaded document on my phone or computer. Please advise. Thanks for a great video.
This is a very useful video thanks James. Also, would like to query why some of the comments from other viewers seem to be focussed on US-related retirement and investment structures. Isn’t 401k a US-based approach? Why are these people commenting on what is clearly a very useful guide for the U.K. - not for the US?!
Love your videos James. So much so that they’ve educated and influenced me to change direction in my career and get into financial planning. Start a new job in financial services in 3 weeks, can’t wait to get going. Thanks for everything
I enjoyed watching every second of this video. Additionally, People are lucky who are able to retire early. I have 15 months till 65 and need to look at calling it quits, my only fear is running out of funds much later, thus keen on investing. What could be the safest possible ways to invest for cashflow, in order to afford my lifestyle after retirement?
@maria_casey truly appreciate the implementation of ideas and strategies that result in unmeasurable progress, thus the search for a reputable advisor... mind sharing info of this person guiding you please?
Amazing video thanks James. I was fortunate enough to find your and other similar channels about 5 years ago when I was 27 and have been making sure I have been investing a substantial portion of my income ever since. I know it might not be quite as popular , but you be able to do a video for those wanting to retire at 55 with 60-100k in retirement. I think it will be really good to motivate as well as inform us of what is required? Or updating the excel you kindly shared for the amounts needed? Thanks!!
Hi James, can the numbers be interpolated? For example, for an income of £25,000, would the number be half way between the numbers for 20k and 30k? For ten years, can these numbers be divided by four? For the 100% certainty of £30,000, can the 90% value be calculated using the 100%:90% ratio for 20k?
Hi James, if you hold a cash buffer of say 2-3 years expenditure , wouldn’t that enable you to avoid draw down during at least some, hopefully the worst, market downturns and hence increase the overall average returns achieved over the life of the retirement?
I would not go so far as to say that it will be return-enhancing. The goal of the cash buffer is to reduce stress, moderate behaviours, and prevent mistakes rather than to "enhance" returns.
Only after my dear mother passed away and I acted as executor on her estate did I realise how brilliantly she did as a professional woman and the way she looked after her finances over decades. She could easily have afforded to have retired earlier and avoided doing a couple of jobs she did not enjoy, as well as spent some of her money to make her life easier and more enjoyable. The message here is, if we are going to put all this effort into looking after our future finances we should also make plans on how to enjoy that money when we are older. The goal should be to retire around 55-58 years of age and enjoy our lives, whilst making provisions for our legacy. Be great now and your future you will be grateful!
You can get free advice from the government organisation Pensionwise on this subject. They will advise on pros and cons. Your personal situation is always unique, but drawdown requires a financial nouse, discipline, numeracy and emotional detachment that not everyone has if you want to go DIY. Getting support via a FA will cost you - an extra 1% each year of your funds as a rough indication
@@elephantandcastle838 thanks for the pointer. All pensions and situations are unique - not sure of what you're trying to say there.. All I'm after is a generalised mention on annuities, if James likes annuities or draw downs more, and what his reasonings are.. it looks like more direct draw downs, and probably because he gets utilisation of the full funds - but it would be an interesting video if he could throw in a comparison or two that'd be great too.
I'm saying annuities can be a good choice for retirement but not for others. Consider dependants, risk tolerance, behavioural traits, objectives, pot size, other income streams including state pension, your health to name but a few. There is no simple answer. Yes annuities could do with more coverage, but bear in mind the potential conflicts of interest of those who are tilting your views one way or another
@@elephantandcastle838 what you've just said applies to every single video James produces. Your post can be summed down to 1 thing 'you need to think about your situation'.. yes, and? That's why my comment is asking for James' thoughts on the subject in video form - for more information on multiple situations prior to needing that information... Isn't that the point of his channel? To share knowledge and examples?
Fantasticnvideo. I So need you to review my position as I'm 50 and really want to retire at 60/62. Would love to have a go at that excel calculator from this video.
Thanks James. I wish it was easy to understand how much is required when you've got both DB and AVC pensions - any tips on this? I try to follow Martin Lewis' general rule but it's hard to work out!
Hi James, can you provide the numbers for early (FIRE) retirees for those aiming for retirement at i.e 45, 46, 47 yr old etc years and bring this up to your 55 year old retirement example?
I have a personal pension that all my employers have paid 5-7% employers contributions into it. That, combined with the tax relief means I have ended up with a bigger pension than the amount I have put into it would suggest. Employers contributions really help.
Hi James. I think it's time for a video on the new lifetime allowance rules. First, there's a limit of £268,275 'lump sum allowance' equal to 25% of the new 'lump sum and death benefit allowance' Now unless you are desperate to pay off a mortgage, most people will not take 25% of their pot at retirement. If you have a £500k pot at retirement, for example, hopefully it will grow over the years and you will be able to take more than £125,000 tax free. So two questions arise. Who is supposed to keep tabs on the actual amount of tax free cash you withdraw? And what will happen if you breach the limit? And a question that I've always had, which may now be moot unless the lifetime allowance is reintroduced by a different government, if your pot continues to grow and looks like it will breach the £1,073,100 limit, at what point should you start to take large amounts out so you don't end up paying huge amounts of tax?
The drawdown as a % of capital is on average 5-6%, so it's not far off the 4% rule. I think it re-enforces that the 4% rule is pretty safe & conservative. Spending will definitely decrease as one gets older though. Medical expenditure will increase though.
A drawdown of 6% is a LOT different than drawing 4%. You would then be taking 50% more from your pot. A 4% drawdown that ended up lasting 25 years, may only last 16.7 years with a 6% drawdown, all other things being equal.
It would be great if you took a look of the effects on pension pots depended upon where you live e.g. I have a uk pension pot of XXX, but plan to retire in a South Asia country where cost of living is 0.5 or whatever, that of UK...
Yes agree it’s all about the uk I’m definitely retiring abroad not Asia mind. There is no cheap country anymore but definitely more better quality of life plus weather and cheaper outgoing again it’s liveing whit in one’s means.
James this resource is fantasic. You mentioned thinking for couples in your video but I' wondering if this spreadsheet can show this as well? My wife and I process all our income and expenditure jointly, so jointly planning our needs would be helpful.
These things are so specific to individual circumstances and preferences. I was 35 (6yr ago) and my aim was to save £750k (nominal) by 65 to be able to support £1k p.m. expenditure from age 65 (in real terms for the rest of my life). I'm planning to minimise tax and take enough risk, to achieve a return in line with inflation before/after retirement. Pretty simple plan but with plenty of room for flexibility/adjustment.
Here's a question I've not seen asked. I'm not a million miles from 55 so starting to think about the tax free 25% draw down. I have an ISA, I have SIPPs all pretty much identical (invested into the same global index funds on platforms with low/zero fees). Is there any benefit in not taking the 25% tax free (or at least 20K chunks) and funnel it into the ISA's? Does the pension wrapper offer anything on static cash (ie not money coming in, or money leaving) that an ISA doesn't? The main downside I see is I'd burn through ISA allowances every year until the 25% is reached.
But, just as a thought experiment. What if you retire at say 65, and you spend like crazy for 15 years, travel, classic car, give to kids, dinners out, nice clothes. Then at 80 your funds are depleted and you lower your lifestyle costs to basic until you die. That could be 5 years that could be 15, would you have made a mistake? Because in my personal experience I spent every penny I made from 16 to 25 on travel, living abroad, changing cities, jobs, learning & experiencing the world and now that I'm 30 and I'm more sensible and I'm far richer, I am not happier or more fulfilled. I'd give all this invested money up to regain some of my youthful naivety and sense of adventure. Sometimes I think all this hyper focus on financial outcomes just kills the spirit
We all sit on a spectrum of living for today vs living for tomorrow. Many people live for today without truly considering the consequences and how they might be robbing themselves in the future. At the other end of the spectrum, people can spend their lives living in the future. They look forward to a point in time when they've saved enough or got to a level in their careers, and THAT's the time when they'll start living, start feeling fulfilled. But often, when they do get there - if they ever get there - they don't feel what they were expecting. Financial planning is not about maximising financial outcomes; it's about using money to optimise for maximum lifetime fulfilment. Although an extra £1,000 invested today could turn into £5,000 at retirement, would spending that extra £1,000 today give you more fulfilment than having an extra £5,000 at 65? Bill Perkins, the author of Die With Zero, gives some good advice on this, I would check out his book.
I absolutely ragged it until my early 30s because I was a youthful idiot. Took poorly-paying jobs that were interesting. Travelled instead of saving, said yes to every social invitation, took months out of work at a time to read, learn, catch up with friends. I'm much poorer now as I try to backfill my pension, and will not have enough to retire in luxury. Would not change a thing.
I'm not understanding why the 2 year cash buffer does not affect the total required. That cash will gain far less value through investment over time, possibly even lower than inflation, and you're making a lot less money through your stocks and bonds.
I watched your 4% rule video and if my understanding is correct the numbers don't tally - for 50K you'd need 1.5m at 55 - even including a second state pension it doesn't seem to come close to the figures in your 4% video, be great if you could explain the difference in the models.
Thank you for this incredibly generous free content. It answered so many questions that I’ve had on my mind in one sweep. Excellent stuff. I have a question about the calculator sheet you provided. I’ve experimented with an online compound interest calculator, and one useful feature is the ability to build in a fixed contribution percentage increase each year, e.g., 5% increase,or whatever. Does your sheet use similar assumptions for its calculations? Thanks again.
Hi James, saw your pinned comment, the word "expenditure", implies the money is NET of tax, sustainable or otherwise (I assume by sustainable, you mean inflation adjusted). Unless all your investments are only in a very large ISA, you need to know how much is in an ISA vs SIPP vs outside a tax wrapper. Say you use the 4% rule, £50k would be equivalent to a SIPP of NAV £1.25M, which unless you have fixed protection2014/16, means your 25% cash component is still capped at £1.073M. It's nice to keep things simple, but sometimes the devil is really in the detail. Also think "backtesting a 100 years" is a waste of time. How bonds and equities behave now is completely different for the 1930's, 40, 50's. Eg. I don't think people would have blinked an eyelid if the Chinese property market crashed in 1930!
To be super clear, we're talking about sustainable expenditure here. The software takes care of taxes.
It's assuming you have no other income or capital gains coming in from other sources other than the state pension, as indicated.
Why do you assume everyone will get state pension? I won't because I will have worked less than 10 years by the time I retire.
@@ZelenoJabkobecause I imagine the vast majority of people watching this video will get some state pension, and a large percentage will get the full amount.
I presume this does not work on phones? I input email and it just says download should begin shortly. Thanks!
@@OMGxILoveNo0bx Perhaps not, you can make a copy from here:
docs.google.com/spreadsheets/d/19C7lE25wEbcDbODnWIH7WK9B2UBTszlolItBJFwK78o/edit#gid=1103659851
@@JamesShack it doesn't work on web browser either.
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My Husband and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement
This is true. I'm in my mid 50's now. My wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more. I'm making money even before retiring, and my retirement fund has grown way more than it would have with just the 401(k). Haha...
Interesting. I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation..
I definitely share your sentiment about these firms. When I was starting out, I checked out a couple of freelance investors online, so you could do the same. I personally work with “Teresa L Athas”, and she's is widely recognized for her proficiency and expertise in the financial market. With a comprehensive knowledge of portfolio diversification, she is acknowledged as an authority in this field.
Thanks for sharing. i searched her full name and found her web instantly. After reviewing her credentials and conducting due diligence, i reached out to her.
@@AaronTilt Scammer Scammer Scammer Scammer Scammer!
CORRECTION: At 10:00, I said NI for the basic rate tax band is 10%, but as of April 6th 2024, it has been reduced to 8%.
I should really stop filming videos at 10pm at night...apologies for the mistake.
Probably won't be far wrong by the time Labour get back in later in the year 🙈😂
@@BaileyMxX true, I was going to post that - don't worry Labour will fix your mistake posthumously
@@BaileyMxXI agree with you. Saying that I think it's needed and that the government reduced it without thinking about the welfare of our country.
Also, in Scotland the higher tax starts at £42k so the earnings band band between 42 and 50k in Scotland has 42+8=50% deductions a huge mark up for salary sacrifice
@@kykslrthis to me is unconscionable. That's a huge chunk in low middle earners take home pay and many Dont realise it. I try to salary sacrafice below this into pension for now until weans or life events come along. I don't have faith state pension will be anything remotely meaningful if at all by the time we ever retire so better let it grow a bit now for longer.
Loved every second of my watch to the very end. I could really use your help James, I’m 52 and disabled since 2007, still own a small business with $80K in savings. But I'd still love to grow my investments ahead of my retirement.
Before making any investing decisions, it is advisable that you consult with a qualified financial counsellor. Just my two cents.
@@hullbruce Exactly, why I stopped taking financial advise from RUclipsrs, because in reality I end up with a collection of confusing stocks. Whereas, all I needed was a real market expert to have made over $350k in less than 2 years.
Exactly, why I stopped taking financial advise from RUclipsrs, because in reality I end up with a collection of confusing stocks. Whereas, all I needed was a real market expert to have made over $350k in less than 2 years.
@@Aurierserge50 I've been getting suggestions to use one, but where and how to find one has been challenging, Can i reach out to the one you use?
@@Jaymilnere Alicia Estela Cabouli is a hot topic among financial elitist in Manhattan. She's gained some reputation especially during covid. All the info. you need to set up an appointment is on her web page.
I just want my money to keep growing faster than inflation. That’s why I’m looking for companies to invest my retirement savings of $250K I have sitting in the bank. I just don’t know the best strategies to use to make solid gains with steady cash flow.
Some financial circumstances, in my opinion, are best addressed in consultation with a financial counselor, while others may be managed on your own with sufficient research.
You're right. A few neighbours and I in the Bel Air area work with an advisor who prefers that we dollar-cost average across different promising sectors rather than making a lump sum purchase. As a result, my portfolio grew by 40% last quarter.
That is just amazing. I've attempted to employ a financial advisor by doing some research on my own, but it's somewhat daunting. Would you kindly refer the people you work with?
"Amber Michelle Smith" has always been on the top of my list..She is regarded as a genius in her area and well knowledgeable about financial markets. I highly recommend you look her up if you want excellent collaboration.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
Post election is one of those things that could really contribute to portfolio growth and vice versa. I've been going hard with my investments this year and have been able to build up to 180k, Are there tips I could apply to help me grow my portfolio even more during this election season?
If you are in cross roads or need sincere advice on the best moves to take now its best you seek an independent advisor who knows about the financial markets. It's better to hire a skilled financial planner especially if you're not one yourself. I hired one, after my retirement pension took a hit in April due to the crash.
How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?
My CFA ’Gabriel Alberto William a renowned figure in his line of work. I recommend researching his credentials further. he has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Thank you for putting this out, it has rekindled the fire to my goal
Hi James, TY. I handed my notice in. I retire at 55. Done all your spreadsheets, taken expert advice. I can do it.
So good to have a UK focused channel and one that does content that isn't aimed at people who have been saving since 13 on 100k a year
I need a way to draw up a plan to set up for retirement while still earning passive income to meet my day to day need and also get charged lesser taxes even while in a higher tax bracket. i want to invest around $450K savings.
Don't put all your eggs in one basket; instead, diversify into different asset classes to mitigate risk. If you lack extensive knowledge, consult a financial advisor.
pls how can I reach this expert, I need someone to help me manage my portfolio
Found her, I wrote her an email and scheduled a call, hopefully she responds, I plan to start the year on a woodnote financially..
Another great video James. I'm sure I've told you this before, but you really need to get your videos into schools so that the age group 16/17/18 especially get to see this stuff. (appreciate it's accessible to them through here, but I think giving them a nudge to come look would be highly beneficial)
I'm 34 now and really wish I had this sort of advice when I was 18 and just started working. My pension got fairly neglected into my mid 20's, a large influence on this was poor (nonsense) advice from older relatives stating things like "pensions are a scam" etc.
Videos like this help to illustrate just how easy it actually is to save for a comfortable retirement if you start early.
Thanks
Rob
Completely agree. And you're still young, we only properly looked at our finances in our early 50s. Luckily we'd been paying into pensions for years through work but had no idea which funds we were in. We've got ourselves on the right track with the help of RUclips but the best thing is that I've talked about it with my children and started JISAs and JSIPPs and they now understand investing and compounding as teenagers. They're paying small amounts into their ISAs themselves and I see that as a big parenting success!
Pensions COULD be a scam. The government could change their mind tomorrow and "poof" your pension doesn't exist anymore or you can't access it until 80 or whatever.
The answer to everything cannot be the government.
@@esmeecampbell7396 You can't do/not do something now based on what you think "might" happen at some unknown time in the future.
@@esmeecampbell7396private pensions. Also, pensioners are an incredibly unlikely group to fuck over in a democracy - they vote at the highest rate and generally for the most status quo policies with a bit of selfishness built in
I have spoken to a couple of financial planners to try and work this out. I dont have the data to work out the numbers, but i thought the concepts were pretty straightforward. Neither of them could answer these questions. Thanks for putting it here.
I've been watching for a couple of years now and this is the best video yet.
What about eye strain?
My father told me that your desire to do things changes and to that of a lower spend level! He is 80 this year.
Yes. I've noticed that to some extent already just between 55 and 65. The other consideration is that spending will reduce if one has nobody (partner or friends) to share experiences with. Holidays, meals out, etc alone aren't as attractive as shared ones. Do things while you can.
70 year olds mostly spend nothing ,their Zest for Sex ,Food ,Beer and fast cars has long gone ,as has the desire to travel ..Comfort is the Norm .. I semi retired at 36 and have seen em all .. They all regret not doing sooner . I saw my dad slowly Die of Dementia at 90 ..Crack on whilst you can is what I see on an almost daily basis . Most people dont actually live that long ,so bare that in mind ,as well as the potential for WW3 and UFO ,s that are coming /here ,Not to mention Covid episode TWO ,lol. .. Lots of variables out there other than $$$$$$$$$$$$
@Lookup2Wakeup £2k/mnth before or after tax?
I ask as I’m 51 and want to retire at 57. Collect part of my DB pension at 60 and trying to see how much people live on.
I know everyone is different. Wife says I should as I have ailments and enjoy it while I can!
@@darrenholden7447Do a few budgets and see how they look. Basic, comfortable, Best Living…
Big question. Have you proven to ALWAYS live within your means? If it’s proven you have always lived in debt, take car PCP deals, expensive holidays…then these traits are likely to continue. Old Dog and new tricks….
@@darrenholden7447I've worked out that to cover our bills and do a few nice things like meals out and a holiday or two we'd need about £35k pa post tax. Holidays could be off peak and most restaurants do cheaper lunch specials. Hopefully we'll have our freedom passes so free travel in London (if they're not scrapped by the time we reach 60!) It's the council tax which is so high, all other bills will be quite reasonable once the kids have left home.
Would be interesting to see required amounts based on ages 57/59/61/63/65 as an alternative too
Yes agree 🎉
Great video James, excellent information! I am state-side and sat down last week and did a year by year retirement analysis to age 95, looking at annual inflation, social security income, personal investment returns, along with reducing annual spending as I progress through my 80’s and 90’s with my spouse. I landed exactly where you did with your approach. Thank you for sharing your insights and analysis, much appreciated!
i was able to think about my situation and I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, I earn around $190K per year but nothing to show for it yet
This is definitely considerable! think you could suggest any CFP for me or better still can I get on the phone with your CFP? I'm in dire need of proper portfolio allocation.
Looks like she really knows her stuff. I also found her online page and read through her resume, educational background, qualifications and it was really impressive.
this is absolutely incredible bc i also get my instructions from this lady, her techmical skill and approach to the market has earned her alot of success , good to know shes also helping others too
i just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. Instead of trying to predict and prognosticate the stability of the market and precisely when the change is going to happen, a better strategy is simply having a portfolio that’s well prepared for any eventually, that’s how some folks' been averaging 150K every week
Hi James, I recently found your channel off of some other financial channels I watch. I am someone (possibly) quite typical in that I am just realising that although I’ve paid into pensions (workplace and private) for some time I may not have been giving it the attention it deserved and at 58 (this year) need to pull the finger out, it’s good to put figures (even if they are ballpark and dependant on returns) to the amounts needed to sustain (in my case) 20 to 30k a year once retirement comes.
I’m glad you found the video useful and best of luck for the future!
This is the video I've been waiting for! Relatable and concise. Also, thanks so much for the templates, James! Will be sharing this video.
Glad it was helpful!
Yes, I agree. I'm 51, and I'm imagining retiring at 65. This vid is excellent, and the handy tool should get me focused. Thanks very much
Solid video James. I think if people really want to retire comfortably, they need to look at Property too, at least half of all household wealth is sat in Property, those that held onto property the last 2 decades will have seen really solid capital growth. Lastly there is 1 more stream most people forget and that is investing in a business. Most wealthy indians I know in the UK today all have businesses and many retired into their 50s as they did well in business. Consequently they paid off their mortgages and have become portfolio landlords sitting on multiple freehold properties.
A great video with a lot of insights. For me there is this challenge of save, save save and you end up dying 3 years into retirement (all too common story) The balance of living a life you want to live NOW enjoying the things you appreciate more NOW is key. Obviously I am not advocating splurging all of your cash and having nothing for when you finish work I just think each case is different. You don't want to have nice cars, foreign holidays and expensive things when you are 75 so therefore don't need a large amount of wealth at that age
Using this video and the provided tool, I feel that I am "on track", at least for now. Thank you James for another great relatable video.
None of this is rocket science, however if you're not financially savvy, it can really appear so. James has a real strength in being able to break it down and explain it simply. The psychology of investment and the ability to sleep at night, which he touches on are super important and these can prevent the "mistakes" he mentions.
Good work James.
Thank you very much for saving so, I appreciate it!
Don't forget: the government has shown they're capable of messing with or raiding your pension. So far they haven't touched the ISAs - I'm guessing having paid full income tax on it, it's harder to justified scalping it. For that reason, I'm trying to make sure my ISA has close to half of my retirement fund assets in it.
I don't think I will ever retire as such, I have 2 businesses and have taken a few months
off in the past but being in contact with people and just doing stuff is really rewarding.
Gotta keep moving 👍
You can still be in contact with ppl and very much have a rewarding life without work. Life, for some people, is so much freer and expansive without the construct of work. Taking regular breaks from work has allowed me to appreciate the opportunities for life. I have a wonderful job, don’t get me wrong, but there is a world out there that needs to be enjoyed.
Same here I’m in a well
Paid Easy stress free job but they still have my time for 8 hours a day and I hope to get rid of that at 60 and do what I want to do each day.
The Market have been suffering over the past month, with all the three indexes recording losses in recent weeks. My $400,000 portfolio is down by approximately 20%, any recommendations to scale up my returns before retirement will be highly appreciated.
Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.If you're new to investing or don't have much time, it's best to get advice from an expert.
Can you share details of your advisor? I want to invest my increased cash flow in stocks and alternative assets to achieve financial goals.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
Great video James! Retirement planning is the real gap since pension freedom. I work in investments and took some free advice from our IFA division recently, all they wanted to do was 'move me onto the platform (with a "staff discount")....all I wanted to know about was tax efficiency, retirement planning and paying into my partners pension as a more efficient way of drawdown in retirement....we spent most of the hour talking at crossed purposes!! I have been looking at 75% (global) equity with 25% spot price gold as a buffer....I know it's not traditional equity bond, but after the truss budget I have less faith in bonds being a buffer any more......have you ever thought of doing backtesting on equities and gold? would be interesting to see........
This video is absolutely excellent James. I can't believe how clearly you managed to explain what is a very complex topic.
Edward Tufte would not be especially disapproving of your charts, I think, and that's really helping.
I have Tufte’s book “The visual display of quantitative information” on my bookshelf - not many people quote him 😂😂
I know that ISAs are not as tax efficient but I have been contemplating having an ISA for income top-ups and to delay drawdown. Essentially buffer plus a big excess. ISA just in case I need money before retirement. Seems like a sound plan in my head
That spreadsheet isn't downloading for me. I've tried two different browsers too
Loved this, clear, accurate and unbiased. You put into words what I have looking at and working towards for the last 5 years. I agree the answer is not straight forward and needs thought especially around the nuances of the related issues like drops in stock market, changing investment thoughts, fees and investment balance. Thank you for this.
Thank you. Retiring at 55 would be a bit of a dream as I’m only a couple of years away but I can at least see that the value of my pension pot which currently feels like way too little isn’t so far away from being enough. Hopefully I can quit before I’m 60 😊
Nice tool it validates my own assumptions of where I'll end up on a conservative 4% interest (My SIPPS rate is 12.42% so defintly on the conservative side). I know what I'm contributing and timescales, it's the goal which is a little fuzzy. I finangled the target in steps to fit in my plan. £257 for 1 year, £357 for 19yrs then up to £530 for the last 14 once my mortgage is paid off. £380K at 68 seems pretty positive when my take home after tax is only 21k. Looks like I'll end up with a choice between more income then when I was working or retiring earlier. Probably a bit of both.
Great analysis, but I would have thought in later life you will be in a position to contribute much large sums and consider retirement much earlier
@@christopherjhall It would be nice, unfortunatly I'm not particularly career driven and easily get complacent. My goals have generally been to afford a house & make enough that I don't have to go days without electric or food like I did as a child. It's part of why it's taken 11yrs to get to 26K as I've already got that. Unfortunatly there is also not much in the way of job opportunities locally and my natural skills would have me do well in areas like social care or working with special needs. Areas not particularly known to be a lucritive career path.
The problem is most of us leave it too long before thinking of a pension, then you have a mortgage and other bills so saving for a pension is hard.
Well said 😂😂😂
You're not saving for "a pension", you're saving for your future self who would otherwise not have that money. When you have the ability to earn, you (should) have the ability to save - now or in the future (even just a little bit) but when (potentially all of a sudden) you're not earning, you're just spending, what your future self might need to survive.
@andrewkemp2238 yes you need to save for your future but the amount you need is crazy amount and that's the problem most of us only see this when 40 and think how do I save £1 million in today's money for time I'm 65.
Go where your savings work hardest for you. Expenses 30%+ less in SE Asia, great quality of life and private medical care, particularly Thailand, Malaysia.
Agreed. My plan is to go to Malaysia but they've just suspended the MM2H program and are looking at revising the qualifications to apply.
That's a bit sad unless U really want to live there. U gonna leave your grandkids behind and move to Uruguay because U didn't save enough to live a decent life in the UK?
@@FlorinVZahariabit sad trying to tell other what they should or shouldn't do they may not have grandchildren and they may have great savings but it will certainly go a lot further in other country's could take the family with them the uk lost its way a long time ago and is only getting worse anyone able to should leave while they can this country is not great anymore it is a cyst pit of utter bs soon as I retire I will also be out of this country as quick as possible
Could you do a video like this for those of us looking to retire in our mid-late 40's ? as the calculations seem far more risky when there are many years before we can access any pension benefits.
You have produced some very informative video's James, which should help pretty much anyone to reconsider what they are doing with themselves. I think healthspan information wrapped into your current content would further focus your viewers attention, if indeed you have not convinced them already! :-) Apologies if this is elsewhere. Thankyou for your efforts.
Hi James, Great video again. I can't seem to get the How much to save tool to either download or send to an email address. Perhaps it's just me. Keep up the good work.
same here
Thank you for for bring up this video! Recessions are an unavoidable part of the economic cycle; all you can do is prepare for them and plan accordingly. I graduated into a slump (2009). My first job after graduating from college was as an aerial acrobat on cruise ships. Today, I work as a VP for a global corporation, own three rental properties, invest in stocks and businesses, run my own company, and have increased my net worth in the last four years.
I have really been looking into mentors lately, the news I have been seeing in the market has not been so encouraging
I would really want to use the expertise of this advisor. please is it possible?
Gloriously simple. Well done James. That tool looks like fun. I'd love to know what the spending of pensioners who own their own home is by year. At 65 you need £blah. at 75 , etc. I always imagine I'll spend very Little but “assumption is the mother of all mistakes” .
I don’t understand the assumptions behind the DC Pension figures at 09:17 - given that dividends will accrue and compound tax free in a pension, and that 25% can be withdrawn tax free, I don’t see how you can require more assets inside a DC pension than in a GIA to permit the same expenditure? Even when the pension tax free cash is exhausted, withdrawing funds from a DC pension is no less tax efficient than drawing from a GIA?
Pension is taxed as income whereas selling GIA stocks is only subject to Capital Gains Tax which is a lower rate.
@reavsie1 got it, thanks - I see why it's so marginal now... there's a higher income tax allowance than the CGT allowance, but on the other hand there's a lower 10% starting rate of CGT.
We have paid into private pension, not huge ones at that, but since we have started to claim our state pension we are taxes to the point where any increase in the state pension is swallowed up in extra income tax.
Well look at that, it would appear i have enough, cheers James!
Another excelent video. 😊
7:05 - Care/Assisted living - would be interesting to see how that would impact the plan 🤔
It destroys it which is why it was not included. The reality is that you can only hope you run out of time before you run out of money. Those on the higher end, with 50k per year can just about support one individual requiring care. But if you are a couple, then your significant other has no income for retirement, or worse they also require care and you need to sell off your assets either way.
You would require an income of 100k per annum matched with care home inflation fees to avoid this scenario. This is not feasible for many.
*To clarify, this is for care home assisted living. For private carers to visit your home it is somewhat more manageable, but it would still require a great amount extra, although not double. It’s made somewhat easier with Disability Allowance etc.
Hi James great video as usual, a spread sheet of the first part would be good. I have a few comments, if you have a cascade of pots the net effect would surely mean you need less, as per your other vids you could dynamically draw down? Re pension, if you lucky your company will add their NI savings, for anyone worried I believe salary sacrifice pension is the best vehicle to get to the big numbers, but important is to check for yourself how you pension is invested. A theme you keep touching on are care home costs which could be relatively biblical, how should one think about this, a bit cliche but it’s a concern a long term frugality might be swallowed up by care fees, what are these scenarios likely to look like?
7:20 presumably to get the reduced capital you’ve also accounted for the full £20k/yr needed from age 55-67. However, did you include an amount of money you need per year to pay into the state pension until 67?
My works pension forecasts were scarily bad. If I retired at 62 it was going to pay out 12k per year. Felt pointless. More so as my target retirement was 55, with my mortgage paid off by then. I’m more than happy to live frugally before or after retirement. But I feel the pension was a rubbish way to go; I’d need an investment, and not just a lottery gamble on stocks.
Hi James. Great video and particularly useful for us as the scenario you use as an example closely reflects our circumstances. What would be really useful is if you could expand on the pot size details for a married couple retiring at 62 with disposable incomes of £30k/£40k/£50k (including state pension). TIA (if you don’t ask etc etc 😊)
Great video! Id love to check if I'm on track, but the download didn't work for me.
Hi James…thanks for the amazing video. I am gonna play around with your excel. Does the excel factor in inflation?
Best video out there to show much much u actually need. Thank you for making this video, makes me feel reassured I’m on the right path and will give me confidence when I reach 55.
Thank you for such succinct description. As an NHS employee is there any chance you could do an in-depth look at the old pension they had and new one CARE and how it maybe feasible to reduce it to 65 retirement instead of Gov retirement age? How it maybe possible to boost it. I know a vast amount of people who would be interested as the calculators on the sppa website aren’t always working and the statements are not clear or continued when old portion of pension taken but CARE left in to take later. Many thanks though for all the videos you do. Very much appreciated
Thanks for doing this it's very informative. Do you have a model that allows us to work out our own numbers?
Another quality video 😊
Its a shame we cant cover every eventuality! As nobody's guaranteed govt pensions now as the age is getting further & further out of reach ...im mid 50s ' not the best health now and to expect to live into my 70s and receive a state pension @70 now is pretty unrealistic. My grandparents & parents never made it to 70 😮
Genetics & luck is needed !
Whilst iv saved €200 k for when im 60plus its a pipe dream for many to reach thus age ! 🙏
Not advice but I would seriously consider withdrawing your 25% tax free at 57 & putting it various length cash Isas inc a no or short penalty free access one 👍
A good addition to something like this is - how much money would you need, and need to be investing per month at 20, 30, 40 years old to reach this.
I know how to work this out myself but it’s mind blowing when you see it spelled out - the power of compound growth and how little you need if you start early vs late.
I still have colleagues in their 20s who have OPTED OUT of our employer pension!
thanks James, very informative as usual and much appreciated. You mentioned briefly about the potential very high costs of funding healthcare in later years. I presume that this would have massive and dominant impact on the calculations, is there a reason why you don't take it into account? Many thanks!
Originally, I thought that there are too many additional assumptions related to end of life care that it would be hard for people to relate to.
Length of care?
Both going into care?
What types of care?
Are you happy to sell your home?
Where do you live (affects costs a lot)?
We have default assumptions for our clients, £80k per year for 5 years before they die. But I think I would have to spend 5 mins justifying those assumptions!
However, on reflection I should probably have just showed one scenario and then rolled it back and continued on without it.
@@JamesShackyour reasoning is sound. I would have liked one scenario showing the effect of care on the cost but I still loved the video
Need same version for Canada and USA. Your analysis are awesome 🎉
10:08 I thought I had a handle on the calculations, but I can’t make salary sacrifice be worth that much (the £1724 column). Isn’t the sacrifice coming out of the band you only pay 2% NI on? Is this relying on the employer adding their 13.8% saving to your pension? (My employer is in the process of introducing salary-sacrifice but is keeping the saving for themselves)
Oh wait, I think I’ve got it : £1000 / (0.6 - 0.02) = £1724 (0.6 because 40% tax bracket, 0.02 because 2% NI band)
Also your asuming that there will be a state pension and triple lock will continue, which lets be honest the country can't afford, with a reverse pyramid of population and age groups and lower birth rate.
I think anyone retiring after 2050 should start to question if UK state pension will be as generous or at least become means tested.
Yes but I would say people were saying the same in the 1990s when I was in my 20s, so I planned accordingly. So agreeing with your point is helpful regardless if it comes true or not. There are other issues you are ignoring, like the voting patterns of retirees.
They always seem to find money for gimmigrants , net zero and Ukraine
The UK pension isn't very generous now when compared with other countries. It should match the minimum wage equivalent
Is it worth considering what the purchasing power of £20-50k would be if you're reaching retirement age in 10-30 years?
Hi James, I’m confused by two specific figures in this video. Perhaps you could clarify please?
At 2:10, you calculate/estimate 8.3% annualised returns over the last 10 year period for a 60/40 stock/bonds split, but at 13:50 the slide shows the same 60/40 investment split delivering only 6.6% annualised returns over 10 years (although that’s from 1973). What am I missing? Which figure should we consider the ‘guide’? Your help is appreciated. Good video!
I've just stumbled across your channel James and have watched a couple of your videos. I wish I had taken retirement planning seriously 30+ years ago. I have a few small work pensions but these will add up to bugger all in the grand scheme of things. It is only in recent years that I have invested seriously in a share ISA, which is my main pension vehicle. One thing on many people's mind is IHT and the burden this could leave on our loved ones. This has not been mentioned in retirement planning videos, but surely it is something that also needs to be considered and planned for in the same conversation, right?
Unfortunately, I'm not able to download the savings calculator. I enter my email and it says "Your download should start shortly" . I have tried different devices and browsers. I was already signed up for your newsletter James, will that make a difference? Saying that I tried another email and still no downloaded document on my phone or computer. Please advise. Thanks for a great video.
it doesn't work
It should work now - james-shack.co.uk/savings-calculator
@@JamesShack thanks James, works great
This is a very useful video thanks James. Also, would like to query why some of the comments from other viewers seem to be focussed on US-related retirement and investment structures. Isn’t 401k a US-based approach? Why are these people commenting on what is clearly a very useful guide for the U.K. - not for the US?!
Love your videos James. So much so that they’ve educated and influenced me to change direction in my career and get into financial planning. Start a new job in financial services in 3 weeks, can’t wait to get going. Thanks for everything
I enjoyed watching every second of this video. Additionally, People are lucky who are able to retire early. I have 15 months till 65 and need to look at calling it quits, my only fear is running out of funds much later, thus keen on investing. What could be the safest possible ways to invest for cashflow, in order to afford my lifestyle after retirement?
you should consider investment planning
@maria_casey truly appreciate the implementation of ideas and strategies that result in unmeasurable progress, thus the search for a reputable advisor... mind sharing info of this person guiding you please?
Time becomes more valuable than money as you get older. So if you’re still Working at 60 and don’t enjoy it. It’s time to make plans.
Well said.
Amazing video thanks James. I was fortunate enough to find your and other similar channels about 5 years ago when I was 27 and have been making sure I have been investing a substantial portion of my income ever since. I know it might not be quite as popular , but you be able to do a video for those wanting to retire at 55 with 60-100k in retirement. I think it will be really good to motivate as well as inform us of what is required? Or updating the excel you kindly shared for the amounts needed? Thanks!!
Hi James, I really like how you show your workings and assumptions. Thanks for the video!
Hi James, can the numbers be interpolated? For example, for an income of £25,000, would the number be half way between the numbers for 20k and 30k? For ten years, can these numbers be divided by four? For the 100% certainty of £30,000, can the 90% value be calculated using the 100%:90% ratio for 20k?
Thank you James, could you do a similar video wth property assets rather than shares? 😊
Cash buffers can be in a cash ISA @ 4.25% minimum, they don’t have to be at zero
New to the channel. Super helpful videos. Thank you 🙏 What’s the backtest sw you use?
Hi James, if you hold a cash buffer of say 2-3 years expenditure , wouldn’t that enable you to avoid draw down during at least some, hopefully the worst, market downturns and hence increase the overall average returns achieved over the life of the retirement?
I would not go so far as to say that it will be return-enhancing.
The goal of the cash buffer is to reduce stress, moderate behaviours, and prevent mistakes rather than to "enhance" returns.
Only after my dear mother passed away and I acted as executor on her estate did I realise how brilliantly she did as a professional woman and the way she looked after her finances over decades. She could easily have afforded to have retired earlier and avoided doing a couple of jobs she did not enjoy, as well as spent some of her money to make her life easier and more enjoyable.
The message here is, if we are going to put all this effort into looking after our future finances we should also make plans on how to enjoy that money when we are older. The goal should be to retire around 55-58 years of age and enjoy our lives, whilst making provisions for our legacy. Be great now and your future you will be grateful!
Great advice
55??!! You’re joking right?!?
It might be nice to know if you think annuities are a good choice or not for retirement, instead of directly drawing from your funds..
You can get free advice from the government organisation Pensionwise on this subject. They will advise on pros and cons. Your personal situation is always unique, but drawdown requires a financial nouse, discipline, numeracy and emotional detachment that not everyone has if you want to go DIY. Getting support via a FA will cost you - an extra 1% each year of your funds as a rough indication
@@elephantandcastle838 thanks for the pointer. All pensions and situations are unique - not sure of what you're trying to say there..
All I'm after is a generalised mention on annuities, if James likes annuities or draw downs more, and what his reasonings are.. it looks like more direct draw downs, and probably because he gets utilisation of the full funds - but it would be an interesting video if he could throw in a comparison or two that'd be great too.
I'm saying annuities can be a good choice for retirement but not for others. Consider dependants, risk tolerance, behavioural traits, objectives, pot size, other income streams including state pension, your health to name but a few. There is no simple answer. Yes annuities could do with more coverage, but bear in mind the potential conflicts of interest of those who are tilting your views one way or another
@@elephantandcastle838 what you've just said applies to every single video James produces. Your post can be summed down to 1 thing 'you need to think about your situation'.. yes, and? That's why my comment is asking for James' thoughts on the subject in video form - for more information on multiple situations prior to needing that information... Isn't that the point of his channel? To share knowledge and examples?
Fantasticnvideo. I So need you to review my position as I'm 50 and really want to retire at 60/62. Would love to have a go at that excel calculator from this video.
Thanks James. I wish it was easy to understand how much is required when you've got both DB and AVC pensions - any tips on this?
I try to follow Martin Lewis' general rule but it's hard to work out!
Hi James, can you provide the numbers for early (FIRE) retirees for those aiming for retirement at i.e 45, 46, 47 yr old etc years and bring this up to your 55 year old retirement example?
I have a personal pension that all my employers have paid 5-7% employers contributions into it. That, combined with the tax relief means I have ended up with a bigger pension than the amount I have put into it would suggest. Employers contributions really help.
Linear and super easy to digest!
Simply brilliant!
Hi James.
I think it's time for a video on the new lifetime allowance rules.
First, there's a limit of £268,275 'lump sum allowance' equal to 25% of the new 'lump sum and death benefit allowance'
Now unless you are desperate to pay off a mortgage, most people will not take 25% of their pot at retirement. If you have a £500k pot at retirement, for example, hopefully it will grow over the years and you will be able to take more than £125,000 tax free.
So two questions arise.
Who is supposed to keep tabs on the actual amount of tax free cash you withdraw? And what will happen if you breach the limit?
And a question that I've always had, which may now be moot unless the lifetime allowance is reintroduced by a different government, if your pot continues to grow and looks like it will breach the £1,073,100 limit, at what point should you start to take large amounts out so you don't end up paying huge amounts of tax?
The drawdown as a % of capital is on average 5-6%, so it's not far off the 4% rule. I think it re-enforces that the 4% rule is pretty safe & conservative. Spending will definitely decrease as one gets older though. Medical expenditure will increase though.
A drawdown of 6% is a LOT different than drawing 4%. You would then be taking 50% more from your pot. A 4% drawdown that ended up lasting 25 years, may only last 16.7 years with a 6% drawdown, all other things being equal.
What about spending down your capital after a certain age?
Nobody needs to have £300k in investments when they die.
It would be great if you took a look of the effects on pension pots depended upon where you live e.g. I have a uk pension pot of XXX, but plan to retire in a South Asia country where cost of living is 0.5 or whatever, that of UK...
Yes agree it’s all about the uk I’m definitely retiring abroad not Asia mind.
There is no cheap country anymore but definitely more better quality of life plus weather and cheaper outgoing again it’s liveing whit in one’s means.
That spread sheet it pretty damn good, I had a similar one for calculating how long it would take me to pay off my mortage if overpaid.
Excellent video. Would love to see a follow up of this based on retiring at 60 as I'm going to need to start saving.
James this resource is fantasic. You mentioned thinking for couples in your video but I' wondering if this spreadsheet can show this as well? My wife and I process all our income and expenditure jointly, so jointly planning our needs would be helpful.
These things are so specific to individual circumstances and preferences. I was 35 (6yr ago) and my aim was to save £750k (nominal) by 65 to be able to support £1k p.m. expenditure from age 65 (in real terms for the rest of my life). I'm planning to minimise tax and take enough risk, to achieve a return in line with inflation before/after retirement. Pretty simple plan but with plenty of room for flexibility/adjustment.
Umm! How do you plan for social care within this??
He said he had removed it but you should consider it being between £20k and 100k per year
Sign everything over to your kids and if you need social care then the state can pay.
Here's a question I've not seen asked. I'm not a million miles from 55 so starting to think about the tax free 25% draw down. I have an ISA, I have SIPPs all pretty much identical (invested into the same global index funds on platforms with low/zero fees). Is there any benefit in not taking the 25% tax free (or at least 20K chunks) and funnel it into the ISA's? Does the pension wrapper offer anything on static cash (ie not money coming in, or money leaving) that an ISA doesn't? The main downside I see is I'd burn through ISA allowances every year until the 25% is reached.
But, just as a thought experiment. What if you retire at say 65, and you spend like crazy for 15 years, travel, classic car, give to kids, dinners out, nice clothes. Then at 80 your funds are depleted and you lower your lifestyle costs to basic until you die. That could be 5 years that could be 15, would you have made a mistake? Because in my personal experience I spent every penny I made from 16 to 25 on travel, living abroad, changing cities, jobs, learning & experiencing the world and now that I'm 30 and I'm more sensible and I'm far richer, I am not happier or more fulfilled. I'd give all this invested money up to regain some of my youthful naivety and sense of adventure. Sometimes I think all this hyper focus on financial outcomes just kills the spirit
Great thinking. I'm feeling the same.
We all sit on a spectrum of living for today vs living for tomorrow.
Many people live for today without truly considering the consequences and how they might be robbing themselves in the future.
At the other end of the spectrum, people can spend their lives living in the future.
They look forward to a point in time when they've saved enough or got to a level in their careers, and THAT's the time when they'll start living, start feeling fulfilled. But often, when they do get there - if they ever get there - they don't feel what they were expecting.
Financial planning is not about maximising financial outcomes; it's about using money to optimise for maximum lifetime fulfilment.
Although an extra £1,000 invested today could turn into £5,000 at retirement, would spending that extra £1,000 today give you more fulfilment than having an extra £5,000 at 65?
Bill Perkins, the author of Die With Zero, gives some good advice on this, I would check out his book.
I absolutely ragged it until my early 30s because I was a youthful idiot. Took poorly-paying jobs that were interesting. Travelled instead of saving, said yes to every social invitation, took months out of work at a time to read, learn, catch up with friends. I'm much poorer now as I try to backfill my pension, and will not have enough to retire in luxury.
Would not change a thing.
@@JamesShackFabulous book Die with Zero. Just wish I'd read it 35 years ago!!
I'm not understanding why the 2 year cash buffer does not affect the total required. That cash will gain far less value through investment over time, possibly even lower than inflation, and you're making a lot less money through your stocks and bonds.
Thanks for this video! Have you considered inflation in your analysis?
I watched your 4% rule video and if my understanding is correct the numbers don't tally - for 50K you'd need 1.5m at 55 - even including a second state pension it doesn't seem to come close to the figures in your 4% video, be great if you could explain the difference in the models.
Thank you for this incredibly generous free content. It answered so many questions that I’ve had on my mind in one sweep. Excellent stuff.
I have a question about the calculator sheet you provided. I’ve experimented with an online compound interest calculator, and one useful feature is the ability to build in a fixed contribution percentage increase each year, e.g., 5% increase,or whatever. Does your sheet use similar assumptions for its calculations?
Thanks again.
You said 10% Ni, isn't it actually 8% NI at the moment? @10:02
My apologies. That was a slip of the tongue, from April 6th 2024, it's 8% for the basic rate tax band.
Surely leaving out 'average' end of life care costs from the calculations creates a potentially dangerous model to follow?
Great video James. Can you post the equivalent figures at higher levels of expenditure, eg 100/125k please?
Excellent! Fingers crossed the other half can start to build assets soon too.
Hi James, saw your pinned comment, the word "expenditure", implies the money is NET of tax, sustainable or otherwise (I assume by sustainable, you mean inflation adjusted). Unless all your investments are only in a very large ISA, you need to know how much is in an ISA vs SIPP vs outside a tax wrapper. Say you use the 4% rule, £50k would be equivalent to a SIPP of NAV £1.25M, which unless you have fixed protection2014/16, means your 25% cash component is still capped at £1.073M. It's nice to keep things simple, but sometimes the devil is really in the detail. Also think "backtesting a 100 years" is a waste of time. How bonds and equities behave now is completely different for the 1930's, 40, 50's. Eg. I don't think people would have blinked an eyelid if the Chinese property market crashed in 1930!
Is that living off of the interest or drawing down until nothing left at 90 years old or so?