How much do you need to save for retirement
Whether it’s approaching quickly or is still many years away, we all want to look forward to an enjoyable retirement. However, far too many people still lack a clear retirement plan. Perhaps, you might think you’ll never have to retire, but your older self will most likely disagree.
If you don’t have a plan in place yet, then don’t worry – You are not alone! 77% of savers don’t know how much they’ll need in retirement, whilst only 16% of savers can give a figure. 1 Generally, we’re all living longer and in better health, meaning you must make sufficient preparations to safeguard your financial future in later life and to avoid outliving your savings.
Some key questions you should ask yourself are:
- What do you want to do when you retire?
- How much will it cost you?
- Are you on track to achieve your retirement goals?
- When did you last review your pension plans?
- Are you happy with the performance of your existing policies?
The key rule is to find out how much you are going to need in retirement
– and to start planning for it now.
What does a comfortable retirement look like?
A single person will need approximately £10,200 a year to achieve the minimum living standard, £20,200 a year for moderate, and £33,000 a year for comfortable. For couples, it is £15,700, £29,100 and £47,500.
A comfortable retirement means retirees could take advantage of some luxuries like streaming subscription services, theatre trips and three weeks abroad a year in Europe.
Assuming you qualify for the full State Pension of £9,339 a year, the PLSA says you’ll still need to build up a pension pot worth at least £599,667 to achieve a comfortable retirement.
Given that the average amount in an individual’s pension pot after a lifetime of saving is £59,242, many retirees may be shocked to learn how little income their savings will provide.
Create a plan for your retirement
Retirement planning is not just about pensions, it involves looking at several future income streams, whether that be property, investments, pensions and so on. Our financial advisers, supporting our Sapphire contractors, can help you understand what lifestyle you want in retirement and put a plan in place to help you achieve it. They can also review existing plans you may have to see if you’re on the right track.
The nature of contracting means that you might move around jobs quite often, which means that you end up with multiple pensions, with very different investment strategies depending on the employer and not tailored to your owns requirements.
An area where we can help is by providing one managed personal pension for your future employers to pay into on your behalf. One that has a clear strategy and is regularly reviewed to ensure we stay on track to get you the retirement you want.
What should you do next?
Hopefully, you’re realising that it’s better to get started with planning for your retirement sooner, rather than later. So what are the next steps you should consider taking.
Firstly, arrange a free financial review with one of our experienced financial advisers and work out what exactly you want your income to be in retirement.
Secondly, review with the adviser your existing pensions and investments to see what that would give you as an income in retirement and what the gap is between desired income and projected income.
Thirdly, put a clear financial plan in place to then plug that gap. Whether that is starting a pension, putting more into an existing pension, or looking at other diversified income streams like buy-to-let property, downsizing your own home or other investments.
1Pensions and Lifetime Savings Association, 2019
The value of an investment will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.