Starting to plan for retirement? The 3 Tasks I Would Do Today (including 3 free tools)
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- Опубликовано: 8 июн 2024
- The three retirement planning tasks I would start with and keep doing every year.
Download the tools here: james-shack.co.uk/retirement-...
Financial Planning
I am a Chartered Wealth Manager and Partner in a financial planning practice based in the UK. If you would like to find out more about our services, please follow this link: go.novawm.com/getintouch
DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice. Any opinions or assessments expressed are James’ own opinions or assessments, which are not affiliated with any third party. Any representations stated as facts or views based on such facts are relevant to circumstances applicable at the time of publication. This information should never be relied solely upon to make decisions, and James accepts no liability for any investment actions undertaken by viewers. Please seek regulated financial advice or an advisor if you require assistance. The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested.
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00:00 Intro
00:57 Task 1
07:01 Task 2 - How much I should be saving
07:54 Task 3 - Performance benchmark
There are links to download the tools in the description. I hope you find them useful. 👍
Hi James, first thanks for all the great content. Is your Retirement Planner spreadsheet available for download?
Amazing video but I will say retirement becomes truly fulfilling when you possess two essential elements: financial resources and a meaningful purpose in life. Make prudent investment choices to secure good returns and ensure a comfortable retirement. This is how it should be and I really want that have that comfortable life . Any advice on what to do ?
You will need a financial advisor ..... In terms of retirement expectations, I'm fortunate. I used to travel when I was younger, and because I was raised to make sacrifices, I don't have ostentatious tastes. I believe that by engaging in my inexpensive activities and living frugally, I'll have a very good retirement.
YES ...... A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $110k and in the first 2 months , my portfolio was reading $294,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Nice One ! Your adviser must be really good, I hope it's okay to inquire if you're still collaborating with the same adviser and how I can get in touch with them?
YES Scott ..... She goes by ‘Cynthia Mcclure Alexander’’ I suggest you look her up. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did
YES!!! That's exactly her name( Cynthia Mcclure Alexander) so many people have recommended highly about her I'm huge beneficiary of her platform from Brisbane Australia 🇦🇺
Bought a good cross section of an economy after i retired, Also i built a diverse portfolio that i'm attached to because it keeps me motivated. I never follow the crowd emotionally when choosing my picks. To be honest i sped up the profit and stock picking process where possible by using an FA, I also dabble in etf's, bonds, coins etcetera. After my first million I realized that when a stock starts booming chances of you finding out it's potential on time is very slim. most average investors are always late to the party, for this I make sure my CFA handles that, ever grateful to Emily Lois Parker. it’s like turning your notifications to earn more millions.
with inflation worries growing, and the Federal Reserve taking a more hawkish approach to interest rates and bond purchase tapering, a correction is underway.
Impressive!! Also, I did read about Emily Lois Parker on the web, I was able to find her webpage and leave a mail. I'm willing to make consultations to improve my portfolio
i'm happy there are lots of people doing so well...Love this channel for the transparency
I had to Google to be sure, great resume she has.
Go look at your pensions and where they're invested (if they're not SIPPs). I discovered one of mine had been following a predefined plan and quietly shifting units to a commercial property fund - which has performed like dog***t.
Needless to say I'm ni the proces of transferring out!
I have hammered down my monthly / annual budget £ spend back end of 2023 and into 2024. Took action on the following costs to save money: 1. Buildings & Contents Insurance - moved insurer and added with my car insurance - got another £50 off car insurance premium as a result. Further reduced car insurance premiums on two cars we run by adding a named driver, calling insurer to ask if they could do better on the annual requote - they did. Hammered down my Sky subscription. Dropped the window cleaner completely whom was monthly visits. Droped the garden grass maintenance company - monthly cost. Can do both windows and garden myself. Gas & electricity took out a fixed rate deal for one year. Took out a new mobile contract last year - not upgrading my mobile as waste of money to do so. Maybe small things but we can all do them to prevent 'costs creeping - up' as I term it!
I do this 1-2 times per year every year for last 10 years, its like a mini payrise and only takes an afternoon
Great effort.
Although at first glance it may seem like you can't cut anything.
When you actually put in the effort you can almost always find things you can get rid of or reduce without it having a meaningful impact on your quality of life.
Everything we buy or use has a different cost to utility ratio. As our incomes grow we often add items that have little utility, or we think they will be useful but out needs change.
Which is why it's so important to do an exercise like this once a year, weed out the high cost to utility items and re-allocate that capital to more meaningful things.
As a window cleaner I cannot condone your actions 😢
We reviewed our internet provider and cut our bills in half (at least) and I just saved £200 a year on mobile phone SIM.. ridiculous how these things can creep up!
Hey James, stumbled across your channel yesterday and have subscribed. Been going through some of your videos and a lot of great advise, but a lot to take in. Hard to know really what the "best" way is. Of course there really isn't one. But very easy to make costly mistakes and I have made many.
I'm keen to try to educate myself in this mind field to help improve financial security & freedom for me and my family. I have signed up to be notified for your course.
Keep up the great content!
Im 58 and have a detailed spreadsheet model I made and update 1st Feb every year since 2016. That extra 1% return really does make a difference in the long run.
Thanks for your suggestion about investing in health. I was umming and arring about getting a new bike. You have convinced me to do it.
Great detail James, will have a check of the links and see how I'm tracking. Looking at moving my pension was on the cards this month anyway
What a fabulous video! So helpful to me James. I watch most of your content and am about to retire in 4 weeks at 59.5 yrs old…. I’d put myself in the bracket where you said a client is aware of their finances well but not to the point where I know my own personal inflation. My wife and I have discussed the things we’re moving to in retirement and the priorities we want to achieve. One was health and wellbeing but tbh I didn’t know what this meant to me and I’d never considered a financial allocation to a goal. My IFA says my plan should include spending more in the earlier years and this aspect from this video has really opened my eyes to this opportunity and plan to spend to maintain health. Thank you so much
You're very welcome, and congratulations on your retirement!
Thanks for another clear video highlighting three important tasks and how to complete them. Interested to see how your template works if you are close to, or at retirement. I will share this video with colleagues who ask exactly the questions you answer.
Great video once again. Thanks.
Great video, thanks James
Glad you enjoyed it
Fantastic video James (as always) and many thanks for the spreadsheets. Is your Retirement Planner spreadsheet available to download as I couldn't find it using the links?. Much appreciated.
Hi James thanks for the free tools, would be great to see something about how to map out swapping some DB pension for a larger PCLS ...ttied this with excel but its not easy
Thank you, that spreadsheet tool has given me some confidence that Ill easily hit my target in just 10 years (5 years before I was planning to retire at 67), even at 4% growth.
So now just got to hope I don't lose my job and stay healthy so I can continue to invest for that long 🤞
That's good to hear.
Keep in mind that the growth rate used in the How Much Should I Save calculator should be a "Real Rate", so that's the rate after inflation.
If your target is £500k in today's money, you need to use a real return for it to make sense.
Alternatively you could use a nominal return but then your target should be based on the amount of money you'll need in 10 years time, taking into account inflation - which is much harder to conceptualise.
A 4% real return is a good-conservative assumption for a 100% equity portfolio.
Thanks!
I have the Scottish Widows portfolio you show in the volatility comparison. Would you be willing to share an example ETF of your portfolio? 100% equity total return in GBP is what I am guessing is yours, but an ETF example would be great! Great content as always! Thanks !
Here's a suggestion, put a weighted vest on and make cleaning a workout. Save money on a cleaner and get stronger in the process. Health is wealth. 💪
James - great videos and work here generally - keep it up.
My question relates to asset allocation as I near retirement. I am 61 in April and am looking to retire at some time in by 65th year.
I currently have a large part of my pension invested in index funds (Vanguard developed world ex UK, Ftse all cap and a global bond fund.
I currently only have 10% in bonds and wand to progressively ramp this this % up.
I am due the full UK state pension (at aged 67) and my wife will likewise. As a couple thats a good 20K of fixed income guaranteed and index linked. How do I factor this fixed income into my overall asset allocation? If I go for a 70/30 or 60/40 allocation (stocks to bonds) I assume I need to include the state pension in the bond, fixed income side of the ratio, reducing my overall bond amount accordingly?
Do I work out how much an annuity would cost that pays out an inflation linked amount equal to the state pension and assume that is in my bond allocation?
Perhaps a future Vid James?
Andy
Hey James, love the content! I've found your videos so helpful so thanks for making them. I was wondering, when investing in Vanguard LifeStrategy for retirement, whether it's better to do so directly in the fund or through the Vanguard Stocks and Shares ISA? (bearing in mind I'd probably transfer to lower risk LifeStrategy funds over time). Or should I opt for a traditional personal pension?
I think some people will already being doing these 3 tasks, others will not. The benchmarking bit is interesting - I will take a look at that thanks.
I wish you would do a similar one on having retired how to assess if one is being sensible.
How do you assess if the income you are drawing from your investments is sustainable?
@@JamesShack Exactly. You spend years saving and investing and then all of a sudden spending it is an option. You want to enjoy your retirement, but likewise do not want to end up in an unsustainable hole. Mentally changing from save to spend is quite hard
@@Scimitar55 It's the hardest part.
Especially when it's those early years of retirement when you want to be spending the most money, and yet that's the time of peak fear!
@@JamesShack So true
Thanks
Thank you so much, Andre!
Is the Gym Collette's? Great Spot!
We have started to fill in the forms, strangely fascinating exercise. Next plan downsize the house, I worked out we use 25% of it. Now the kids have left home. We did get a Monday to Thursday lodger a few years ago, so get the £7,500 Pa allowance. Which pays the bills for the house. Never see him. Gave up truck driving recently, love not getting up at 03.30 and being away a lot of the time.
Nice work!
You just delayed your cleaner's retirement goals! ;) Great video, as always James, thanks.
Do you have recommendations/video on NHS workers?
Thanks James. If you carry out a Monte Carlo simulation, what sort of percentage success would you recommend to aim for? Always enjoy your videos
It depends...
If you have a high level of discretionary spending (low fixed costs) and are willing to be flexible with how much you spend depending on what happens in the markets, you could opt for a low rate, perhaps 70%.
With this, you are recognising that there is a higher chance that you will need to adjust your expenditure in the future. If you see a poor sequence of returns, you may have to adjust your expenditure significantly. However, if you are prepared ahead of time to do this, or you have options that you can fall back on if you need to, like downsizing or going back to work then this option may work for you.
There is also another angle around risk tolerance. When I work with clients that I have a high tolerance for risk, they are often willing to accept a lower historical success rate. However, that is often not suitable for them because they are often doing "high risk" things in other areas of their lives.
But from experience, most people are only really comfortable, making big decisions like retiring early if they can see a higher chance of success, certainly north of 85%, ideally in the high 90s.
It will also depend on whether your model includes any systematic dynamic spending rules like Guytons Guardrails, or other.
Hi James. If I wanted to use some of your tools (i.e. budget planner) for some of my own financial coaching clients? Would there be an issues, such as copyright? Or do you give permission to use these for my own commercial reasons? Thank you
I’m a firefighter and our pensions have changed a lot in the last few years. I’m wondering where I stand now. I have watched a few of your videos and wondering where I can get help from? I’m 45 and should be able to retire at 50 after 31 yrs service. There are calculators floating about but they don’t help me as it seems like I’m not protected in the recent changes.
If you could point me in the right direction or where I could contact yourself for more detailed help that would be great. This would also help a lot of others in the same situation
Many thanks in advance for any help anyone with more knowledge than myself
Hi James, would you be able to do a video on different approaches/options in the scenario where an employee is set to receive a return as part of a Sweat Equity Scheme? Thanks!
What type of schemes are you in? There are several types of option schemes used in the UK.
@@JamesShack Sweet Equity scheme. £1 buy-in per share, class C shares
I'm a Yorkshire man who (without knowing what the fire movement was) at the age of 34 - chucked everything at the mortgage, then once cleared, got a lump sum pay off from work, then had a demented mother to luck after, so never really got to live a normal life for the last 25 years, I live on 3k a year because I've learnt to do everything from cooking, to fixing my car , to renovating my house with little money. My problem is I don't know how to spend money. My monthly outgoings are about 350 a month.(Inc all bills). I've a 1/3 of a gold plated pension, 200k+;in stocks and no mortgage. How should I spend my money, and how much will I need in old age , I'm 55 yrs old, happily single and Yorkshire .
Ps, I love watching your videos and think youre
a really sound guy
Hi James. Have been watching your amazing videos with a great deal of interest, what a lot of work you put into these. Can you do a video on charges that relate to pension funds. I don’t know what is acceptable, what is the norm, and the effects these have. I have a managed fund and seem to pay out a lot, and when I think what my fund lost back in 2021 when I expressed concern as to the economy and nothing appears to have been done to mitigate the effects and subsequent losses I wonder what I am actually paying for. Many thanks.
For a platform fee, you should expect to pay between zero and 0.4%. Zero because sometimes pension providers roll all of the fees together into an investment fee.
For investments, if it's a passive fund, you should expect anything from 0.1% to 0.3%. If it's an active fund 0.3% - 1%.
For a low-cost platform with passive funds, you can expect to pay 0.35%-0.5% all in.
Great stuff James and thanks for the freebies! The benchmark performance data is screaming that majority stocks is always the winner, therefore high risk is always the best bet unless you are planning to spend the lot within 5 to 10 years?
Not over short periods, but over the long term generally yes, stocks outperform bonds.
However, the real question is whether you can handle the volatility of a 100% stock portfolio. Because it's going to be pretty painful in the short term.
What happens if you reach the cap on pensions prior to retirement (assuming the government introduce a cap again), even if you are not actively investing further income into it, so the growth in the markets takes it over the cap - does this increase get taxed or would it be only any income added from your salary?
It depends on whether the next govt re-instates any sort of cap and what it looks like.
Currently, if your pension grows over the £1,078,100 lifetime allowance, it just means that you don't get tax-free cash on the portion over the limit.
I did a video on how the old rules worked here: ruclips.net/video/hqfsfpK8WZU/видео.htmlsi=8JzvdVirRnCOIk1b
Family sports club (the Roehampton club in SW London) is one of our best expenditures. Don’t regret it a bit - even if the bill hurts!
It is good there; I've played Padel there a few times.
This is the Harbour Club in Fulham. I would love to be a member of the Hurlingham but no amount of money can get you one of those!
Have you tried Chiswick riverside virgin active? Awesome! But… £500 joint fee then £250 per person 😱
@@holisticallyme556 £500 joining fee. You don’t want to know the cost of Roehampton…
@@JamesShack suspect you live within 300m of some friends of ours. They were handily ‘born in’ to the hurlingham… nice spot but as I play golf the Roehampton is better for me
How can I contact you about cooperation with the channel?
is that family oriented club, HC? 🙂
James,
Please could you make a video discussing DB pensions?
i really enjoy your content but alot of your videos don't apply to me as nhs staff with a DB pension.
There are millions of us in the uk who will still receive DB pension.
A video discussing the pros and cons of these, ways to plan for retirement including these schemes etc would be extremely useful
Thank you
The retirement spreadsheet can include DB income pensions in the input section- just the commencement year and annual value
A DB pension is all pros - no cons!
@maltesetony9030 is it, though? I work a very physically demanding job but can't draw my pension until 68 (maybe later) without a large penalty. Despite paying around 10% of my salary as contributions, when I actually retire in my early 60s my pension will be reduced to about half the forcast amount
@@tomwestcott4036yes, but that would be the same if you were not on a DB scheme, and the NHS scheme has very generous contributions from the employer, and you have no risk. It's a win, win for you.
If you don't want to bring the date you receive your DB pension earlier, then try to save enough to cover for those years living costs (e.g. you want to retire at 60, and start taking your DB pension at 68, you need 8 years of living costs saved) then you can retire when you want and still not bring your DB pension date earlier.
@@maltesetony9030 Parts of my DB pension will increase by a maximum of 2.5% a year once in payment irrespective of inflation. That is down to legislation introduced by Gordon Brown who of course put an end to Boom and Bust, To be fair some people have suggested that before then there was no requirement to increase pensions at all.
There is certainly no triple lock in DB pensions.
@tomwestcott4036 it would definitely be worth looking at the return on increased pension payments especially if you are getting close to retirement.
James, is there an easy way to find all of my old pensions from previous employers and have them all transferred into my Vanguard sipp?
Google lost pension finder and click on the government link. That will hopefully find your lost pensions.
As Clarkey said, the main battle is finding your pension and understanding if they come with any special benefits.
Some older pensions have additional benefits attached to them, like guaranteed annuity rates or enhanced tax-free cash.
So you should always check for these first as it may make sense for you to keep it where it is.
In addition, some work place schemes are very cheap, cheaper than Vanguard, so if they have good investment options again it may make sense to keep it.
You also need to consider whether the below will affect you, this is a paragraph from a recent pension recommendation I gave:
*There is an ongoing government consultation to increase the minimum pension age from 55 to 57 in 2028. Under the current proposals, it is likely that your existing pension would keep a minimum pension age of 55 which will be lost on transfer to the NOVA SIPP.*
It is expected that some pension providers will allow you to retain a pension access age of 55 if you stay with them, even though the age limit is going up to 57. This will be lost if you move it to a new SIPP.
For many of my clients this is irrelevant because they don't plan on drawing their pension before 57, but this is something you should consider as it may affect you.
@@JamesShack many thanks for such a substantial response.
Can you make a video on Investing in Gold, Gold ETFs and the pros and cons. Gold ETFs Vs s&p 500 Vs Nasdaq 100?
Thanks
@@Contact__James___now
@jamesShack is this you?
Over the long term 100% equities has outperformed going 80/20 or 60/40. So what risks should we be aware of when choosing a pension fund that is 100% equities? Why would a 30 year old, for example, choose not to go for that?
Your tolerance for short term pain.
Although if it's in a pension you can't touch it until your at least 58 anyway so, you should not really care!
Hi James, on the how much do i need to save tool is the figure including tax relief i.e. as a BR tax payer using a SIPP + LISA if it says £1000 should i be transfering £800 or £1000 from my current account?
It does not account for any tax. So if you’re trying to model a pension, that would be the gross contribution. So as you say, you’d need to contribute £800 if a SIPP.
Thanks 👍. I'm modelling a bridging pension until a DB kicks in and lump sum paying off the mortgage following a strategy from another of your videos.
If you are transferring from your current account, then that is normally net of tax (for a normal employee). So, if you transfer £80 into a SIPP or LISA, then the government provides a rebate of 25%, making that up to £100. As James said, his spreadsheet is gross (no tax paid), so your numbers should include the government rebate, i.e. the total value of £100, including the rebate.
If you can make contributions at source (from salary) then you don't pay tax (but you don't get the 25% rebate either) and you also benefit from slightly reduced NI contributions. Contributions at source are especially helpful if you are a higher rate taxpayer because you don't need to complete a tax return. Contributions net of tax only receive the BR rebate by default.
Thanks if/when I creep out of the basic rate tax bracket I intend to switch to at source for that reason. For now I like the choice and options a SIPP gives me. No N.I saving to be had with my scheme it's at source not salary sacrifice.
I assume that "amount to save" includes your employer pension contributions too? 🤔
Hi James,
Isn’t this benchmark missing an important factor?
Performance is one comparison benchmark but another one is that of risk/volatility. The importance of volatility was illustrated brilliantly in your last video with respect to sequence of return risk.
Just comparing performance benchmarks misses this element.
One could asses that their chosen fund was short of the benchmark for performance but was potentially mitigated by far less volatility.
Should one asses both factors when comparing funds?
P.S - still loved the video 😊👍
Yes, you certainly should; however, it can be hard to find that information about a fund.
I use FE analytics for the data.
I think you can get 3-year vol figures from Morningstar, but I don't think you can get it further back without a subscription.
I use the “Financial Times Fund Comparison Tool”; see the “Risk” analysis tab.
This free web site compares funds on both performance and risk on a 2d axis.
Hi James great video as per usual. I have a question, I get a final salary pension which currently would be 25k a year if I worked up to retirement age in my case 65. I also have an add on BRASS scheme which allows me to salary sacrifice and invest that money of which I can take as 65 as a lump sum. Would it be better to max out what I can afford in the scheme or save in a stocks and shares isa? Keep up the great work.
James would need a lot more information than that like your age, salary, and savings. I'm 61 and my only spreadsheet is to ensure that I don't pay higher rate tax. I'm now paying more into my AVC than I ever paid on a mortgage. Most salary sacrifice schemes mean you don't pay National Insurance so £1000 into the scheme costs me less than £600. Of course unlike an ISA I can't easily get at that money until I retire.
More questions than answers I'm afraid. I agree with the points made by @MrDuncl. Your BRASS scheme is an employer's AVC scheme, so it's a good way of saving more than the employer will match in your main pension. The questions are about what happens next: At what age do you expect to retire? If you plan to retire at 65, then that will be before you receive your state pension, so does your final salary pension provide enough to live on without the state pension? If so, you are likely to have a surplus when you start receiving your state pension. Or, maybe you will use your Pension Commencement Lump Sum (PCLS) to bolster your pension and bridge that gap? PCLS is normally a maximum of 25% of your pension value and if your AVCs can be combined with your main pension for the purpose of that calculation, then you may be able to take that as the lump sum, preserving most, if not all, of your main pension to provide the annuity. This is one of the key benefits of some DB/final salary schemes.
Mrduncl's final sentence is also key. For anyone planning to retire before the date that you are allowed to access your pension (currently 55 but increasing to 57 from 2028), I think an ISA or other savings are the only options.
If you are in RPS or are going to be then definitely do some into brass especially if you are in a graded job. Even if role clarity band still well worth doing. Probably better to do a mix of brass and ISA as you can only access brass when you take your pension.
Thank you gentlemen. Yeah I think I’m definitely going to do some into the scheme even if it’s just £200 a month. I’m higher rate tax payer so makes sense really. Probably do a mix
@@sdavis7096 If there is a possibility of income getting further into the higher rate bracket, then you could save into an ISA now and then, as you approach retirement, take that as income whilst pushing more into your pension. James would probably say Nooo! because pushing more into your pension now is 40% tax free and it will have longer to grow but the downside is that pension investments remain inaccessible until the then current government-defined age (around ten years below NPA but that is not set in stone)
Hi James - the tools in the video don’t seem to be linked anymore?
They're in the video description. They still seem to be working.
They're working for me :)
I didn't watch the entire video so you may have addressed this but someone's age must be factored in when deciding how much cash or equivalent to hold. I'm 74 and I can't risk a sharp market downturn at this point, especially because! I expect a market hit in 2024. 89 percent of my money is now in a money market fund earning over 5.25 percent and I can sleep soundly. So making a blanket statement that holding more cash that necessary is not good advice when one factors in age. It's good advice for younger people who will have time to recover from a market hit. And, keep in mind that if the market does take a big hit, I can then move cash into stocks. Because you failed to mention these obvious things, your judgement is questionable. But the, I've been investing for decades before you were even born and done quite well.😊
Why i always put a 👍 even before watching the video because james video are top free investing learning behaviour
Thanks David!
Coffeezilla talks finance
Jamie theakston 😂😂😂
I haven't had that one before, but I can't deny the similarities!
I normally get Andy Murray.