A lot of people aiming for FIRE, in particular the younger folk, don’t include the State Pension in the plans
I understand why that is – they won’t be able to touch their pension when they FIRE by 40, the pension-age goal posts keep getting moved by various governments, it might be means tested, there might well be nothing left in the government pot, etc. So quite a few unknowns there.
However, for me, the State Pension has always been part of my plans right from the start. Perhaps I’m just being over-optmistic that the government ‘will come good’ for me, but it’s probably because I’ve gotten into FIRE later in life so I can consider pensions as part of my plan.
What State Pension Might I Get?
When I first started thinking about FIRE, doing my ‘back of the fag packet’ calculations, I used a nominal £5k as my state pension number – I reckoned that I was going to get at least this amount from the age of 67.
Recently however, I’ve been able to obtain a more accurate estimate (can an estimate be ‘accurate’?) via HMRC’s website:
At the last count, I had paid 30 years of full National Insurance. The requirement to receive full state pension pay out is 35 years.
The five years remaining ties in nicely with my stretch target of becoming FIRE by the end of year 2024…
However, as my work pension was contracted out for most of my career (meaning that I paid less NI during that period), it looks like I have to pay an extra two years to receive the max, so 7 more years in total of NI to pay, with my current forecast based on NI paid to date being £139.18 per week:
How Does It All Fit In?
So how does the state pension feature in my FIRE plans when I won’t be able to get my mitts on it until I’m 67?
Well, it’s income which I do not have to accumulate as part of my Future Fund (my FIRE pot).
If (and I actually hope not) I live to 100, that’s 33 x £8,797 = £290,301 (based on current forecast) which I don’t have to save up for (or generate) as part of my Future Fund.
I think this was one of the reasons I never really got into the whole 25 x expenses calculation for FIRE – I couldn’t see where the state pension fit into the calculation. Nor in my case, my DB pension. My DB pension and state pension combined
will should provide me with a guaranteed minimum income floor, enough to cover all my basics expenses. It’s down to me to make up the extra for a more comfortable retirement.
As I’ve mentioned on previous occasions, my Future Fund is just a bridge from when I FIRE until when I am able to draw on my DB pension (at 65) and then the state pension.
Sometimes my plan seems too simplistic and I get the odd panicky feeling that I’m making a big mistake with my calculations.
Most other times however, it makes complete sense to me.
I’m sure there won’t be many (if any) but anyone else include the state pension in their plans?
Change of Manchester FIRE Meet Up Venue
I’ve been advised that the Manchester FIRE meet up on Friday 29th November will now be at The Salutation Pub, 12 Higher Chatham St, Manchester M15 6ED (just off Oxford Road), not at The Bank.
It’s looking unlikely that I will be able to make it but if there’s a chance I can show my face there (even briefly), I will try!