Financial Plans 2021

[NorthernBoy]

Okay so it’s been the worst year ever for many of us, including myself having lost loved ones.

As such I am trying to focus on the future and my retirement plans and how to finish work as soon as is possible.

Here are my plans and would welcome any suggestions on how they can be improved.

About me, I’m 50, ex RM currently working in a manual job outdoors earning 20k a year, my partner works part time in retail. Our aim is to finish work as soon as possible so that we can travel and enjoy life more, we have no children. We owe 52k on the mortgage which has another 15 years to run, interest rate less than 2%

My intention is to draw my RM pension and avcs at 60s which should be enough until my state pension at 67/8.

I have a separate Sipp worth about 50k which with employer and my work contributions get £350 added per month. After all our bills I think I can add another £400 per month to my Sipp. If I can do this for the next 7 years the Sipp could be worth 120k at which point we will stop work and I will draw it down monthly.

Does the above plan seem reasonable, have I missed anything? Would you do anything differently. My intention is to let the mortgage run full term and not make any extra overpayments

Thanks and Merry Xmas to you all.

[Hawkey99]

Hi Northern,

How long did you work for RM. ?

How much is in your AVCs ?

Its not really anything any one on here could really comment on as they don't know your expense each month.

One things I would say though is that I still have a large mortgage which is a 5 year fixed at 1.64%. I am due to pay it off when I an 74.

This is by choice as I have the money to pay it but would rather keep this money invested which is giving me 8-12% per year over recent years and pay interest of 1.64% over year.

This not advice as many people get a warm and fluffy feeling having paid off their mortgage. For the long game makes much more sense.

Happy Christmas

[NorthernBoy]

Hawkey, thanks for your comments.

I’m the same on not paying off the mortgage early, but I can totally understand why people do it. I was with RM for 22 years and have got about 40k in avcs. We live a modest lifestyle and are looking for a net £1500 a month income in retirement.

My plan is pretty simple put as much as possible into my Sipp between now and 57 and hopefully the pot will be big enough.

I have thought about moving to Cyprus in retirement or at least giving it a go, but my partner is not keen.

Best wishes.

[RobertT]

I would echo Hawkey's comments on not really being able to answer your question, because everyone is different and what's enough to live on for one person isn't necessarily enough for another.
But as a general rule, the more you can save the better, and it looks like you'll amass a healthy amount of money. Tyake advantage of those tax breaks and watch your money grow!!

Many people like to pay off their mortgages early to save on the interest and for the stability it provides. But if you're getting a much better return on your savings/investments than you're paying on your loans, then the choice to not pay it off is understandable.
Again, it's horses for courses to a large degree.

Obviously you've always got the potential for those returns to dry up or for interest rates to increase.

But one main thing you should always do is have a plan and regularly assess it to make sure it continues to match your aims.
That investment fund that's performed well for years might change it's manager and the returns could nosedive. Or your own personal circumstances might change which could have an impact on your plans, etc.

Good luck and merry Christmas.

[rambo1]

Okay so it’s been the worst year ever for many of us, including myself having lost loved ones.

As such I am trying to focus on the future and my retirement plans and how to finish work as soon as is possible.

Here are my plans and would welcome any suggestions on how they can be improved.

About me, I’m 50, ex RM currently working in a manual job outdoors earning 20k a year, my partner works part time in retail. Our aim is to finish work as soon as possible so that we can travel and enjoy life more, we have no children. We owe 52k on the mortgage which has another 15 years to run, interest rate less than 2%

My intention is to draw my RM pension and avcs at 60s which should be enough until my state pension at 67/8.

I have a separate Sipp worth about 50k which with employer and my work contributions get £350 added per month. After all our bills I think I can add another £400 per month to my Sipp. If I can do this for the next 7 years the Sipp could be worth 120k at which point we will stop work and I will draw it down monthly.

Does the above plan seem reasonable, have I missed anything? Would you do anything differently. My intention is to let the mortgage run full term and not make any extra overpayments

Thanks and Merry Xmas to you all.

Pay off your highest interest first. If thats your mortgage, do that if you can. If your cash/ investments aren't getting a regular 2% + , pay down your mortgage. The guy who says his investments are getting a regular 8-12% yr is either doing very very well or is extremely lucky. Another thing, if you take each thing in isolation you wouldn't bother maybe, but a couple of hundred here, a hundred there, all adds up. Try switching banks for incentives if you haven't already. 0% balance transfers are worth thinking about if you have a large amount on a credit card, Santander is 0% plus 0 fee ATM. AMEX give you 5% cashback for new customers for first £5k spend. Subscribe (free) to mse (money savings expert) news letter. Keep yourself informed. Savings rates are pretty dire though ATM. I've put some money with a company called wealthify the investment has done pretty well over the last (tumultuous) year with a 7% increase plus got £40 bonus for investing £400 so 17% for first year. Pretty good. You need to really honestly form a spending plan and include absolutely everything you spend plus a bit for unexpected things and of course allow for inflation too. Best of luck with your plans. ATB.

[Hawkey99]

Rambo,

8% is the average stock market return over the last 25 years. This excludes dividends which when added in and reinvested takes me to the figures I have provided.

Stick your money in global equities and come back in 20 years.......This is not advice LOL....

[koolishy67]

I know interest rate is low but I still try to payoff my mortgage first bcoz still count as borrowing anyway I am investing in stocks since 15-20 years never trust stock market that much

[rambo1]

Rambo,

8% is the average stock market return over the last 25 years. This excludes dividends which when added in and reinvested takes me to the figures I have provided.

Stick your money in global equities and come back in 20 years.......This is not advice LOL....

You're doing bloody well then. What have you made this year. As far as I can see the 100 is down 15% and thats after the recent rally . Divis have been cut across the board also. If you can make an 8% a yr WITHOUT divis you should be a fund manager.

[RobertT]

Rambo,

8% is the average stock market return over the last 25 years. This excludes dividends which when added in and reinvested takes me to the figures I have provided.

Stick your money in global equities and come back in 20 years.......This is not advice LOL....

You're doing bloody well then. What have you made this year. As far as I can see the 100 is down 15% and thats after the recent rally . Divis have been cut across the board also. If you can make an 8% a yr WITHOUT divis you should be a fund manager.

I'm not sure whether Hawkey is basing that on an average of all indices or just one? Or the returns on his own investments?
But an average return of 8% certainly isn't the case for every index around the world.

In practice it's the reinvesting of dividends, taking the long term view and continuing to buy even after a crash(when prices are lower) that really makes your money grow. And of course it depends hugely on the exact investments you have.

[Woody Guthrie]

If you could guarantee 8% p.a. consistently plus dividends over 25 years we'd probably all have retired at 50.

With hindsight you could pick and choose that kind of growth but the Delorean is in the garage at the moment.

[Hawkey99]

I didn't say you could guarantee that you would make that money but the facts are thats what they have delivered over the last few decades.

Have a listen to a podcast by Nick Lincoln called Money Hat Tip.

Regular investments in Global equities plus dividends over a long period of time is what has provided me with a really good return.

As a side issues one of Royal Mails AVC funds Shariah Law which I know Robert, myself and many are in has returned 128% over the last 5 year.

No advice just trying to help. Each to their own....

[RobertT]

If you could guarantee 8% p.a. consistently plus dividends over 25 years we'd probably all have retired at 50.

With hindsight you could pick and choose that kind of growth but the Delorean is in the garage at the moment.

Which reminds me of the projections I got from the PSC 20 odd years ago when I first got interested in AVC's.
The figures quoted for Bonusplan were an annual growth rate of 9.72% and a pot at age 60 of £145k.

To be fair in those days the LEL/LED was the same as the government figure(currently £6,240) and increased each year until it was frozen around 1999/2000.

With a current balance of £18k or so, they were wide of the mark. But still not bad for a £3k net investment by me over the years.

[Hawkey99]

Hi Robert,

Its Global equities I was referring to and your absolutely right its the dividends which drive the price up so much.

[RobertT]

As a side issues one of Royal Mails AVC funds Shariah Law which I know Robert, myself and many are in has returned 128% over the last 5 year.

Actually I'm not invested in the Sharia Law fund!

I looked into it and although the returns have been good, I decided not to go with it because nearly a quarter of the fund is invested with just 4 companies, albeit highly successful companies, making it very risky in my eyes.

In my view it's one to invest maybe 20% of your total AVC pot during the accumulation phase. There's no way I'd pile all of it in.

Plus as I've already gone well over the 25% tax free limit and no longer pay into my Flexiplan account, I'm happy to play it a bit safer, sit on what I've got and 'lifestyle' my investments as I slowly approach 60/65.

But obviously it all comes down to personal choice, etc.

Hi Robert,

Its Global equities I was referring to and your absolutely right its the dividends which drive the price up so much.

But that is still just a general term for one investment sector, such as Japan, Technology, Pharmaceuticals, etc.

In practice you could invest in a global equities fund with Standard Life for example and make good returns. While I could have a global equities fund with Fidelity and be losing money, as it all depends on exactly how our money is invested.

As long as we're happy with the returns we're getting and we all achieve our individual aims, that's all that matters.