- April 24, 2024
- Posted by: legaleseblogger
- Category: Related News
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### Seeking Guidance on Retirement Planning
Hello everyone,
I am reaching out for some much-needed guidance on retirement planning as I navigate this crucial stage in my life.
I am currently 39 years old, married with a child, and considering expanding our family in the near future. We recently purchased a family home valued at £400,000, with £180,000 in equity.
Regrettably, due to poor advice and lack of foresight, my pension pot is alarmingly low, with only around £8,000 saved. However, I do have £30,000 invested in a stocks and shares ISA and £15,000 in cryptocurrency investments, which provides some solace.
At present, I have approximately £1,000 per month available for investment, but this amount is expected to increase to around £3,000 per month within the next year.
As a self-employed individual working in a small company, we do not have any pension contributions in place, choosing instead to prioritize raising salaries whenever feasible.
Understandably, I am feeling lost about the best course of action to take. Should I focus on overpaying the mortgage, maximizing my S&S ISA contributions, initiating a pension plan, or a combination of these strategies?
Ultimately, my aim is to semi-retire by the age of 55, although I am aware that this goal may be ambitious.
Your insights and advice on this matter would be immensely valuable and greatly appreciated.
Thank you.
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Start a LISA before age 40 so you have that option over the next 10 years, work hard building a SIPP pot for access after age 57, and let your S&S ISA bridge the gap between early retirement and SIPP access.
https://ukpersonal.finance/isa-vs-lisa-vs-pension/
Hi /u/Beanofyeam, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/investing-101/
* https://ukpersonal.finance/pensions/
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^(These suggestions are based on keywords, if they missed the mark please report this comment.)
I would suggest you need to prioritise the pension. That doesn’t necessarily mean 100% of the £1k/ £3k, but I would focus significantly on the pension.
From what you have said, can you confirm that you are a director of your own limited company?
If you are then the most efficient way of getting money out of the business and into your deferred hands is by making company contributions in to your personal pension.
Even for a basic rate tax payer, a pension is at least 6.25% more efficient than a ISA, so even if the money comes to you via payroll a pension is better than an ISA.
First of all, are you in or out IR35, who pays your taxes. Is it you or them?
If you are in IR35, request a pension immediately. It’s not them that decides, it will be you! Then you should receive contributions from essentially your employer.
If you are outside IR35, then you’ll be response to setting up and contributing to the pension. See: https://www.contractorcalculator.co.uk/contractor_pensions.aspx
From there, I would say start putting as much as you can in the pension, you’re quite late into the game. Personally, I would seek my crypto and focus on stable investments especially if there’s no pension.
I’d work backwards – work out what your goals/targets are and then you can see what you need to do to achieve them.
How much will you need to retire (or semi-retire) on? Plug some numbers into the pension (or compound) calculators. Keep everything in today’s pounds and ignore inflation as it keeps things simpler.
Thank you. I pay my taxes personally so that’s not an option for me. Brilliant link and advice thank you!
Pension.
Most people with 45% equity in their home should avoid mortgage overpayments – they should aim to pay off their mortgage around the time they retire and not ages before.
But this assumes an adequate emergency fund, no health issues and reasonably secure employment. If you’re self employed, I guess you should gove good consideration to your emergency fund.
I suppose a good thing about the pension, in your position, is that it protects it from bankruptcy – if the business goes through hard times and you take out loans to subsidise it, securing them on your home could cause you to lose it, if the worst came to the worst. Your pension is protected from that.
Read also the pensions and tax traps pages of the wiki. Make sure you understand what your pension and S&S ISA are invested in (read Tim Hale’s [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401)).