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HOW MUCH MONEY DO I NEED TO SAVE BEFORE RETIREMENT?

One of the most important parts of retirement planning is to answer the question: “How much money do I need to retire?”. The answer to this question varies from person to person, as it largely depends on your current income and the lifestyle you want and expect to lead in retirement.

Despite the introduction of pension auto-enrolment in 2012, research published by the Pensions and Lifetime Savings Association (PLSA) shows 80% of us are not confident that we are saving enough for retirement. So, on average, just how much is “enough”?

Calculating your target retirement income

The basic calculation of the amount you’ll need is two-thirds of your previous annual income – assuming you no longer have a mortgage or rental costs. Needless to say, if you still have these payments to make, you’ll need a higher retirement income. 

On average, the PLSA say that the ‘minimum’ amount for a single person is £10,200, which would cover basic costs with some spare money for leisure activities.

For a ‘moderate’ income in retirement, it estimates a single person would need £20,200, which would provide more financial security and flexibility. 

And for a ‘comfortable’ retirement, you would need £33,000 for a single person, which would allow for even more financial freedom and some luxuries.

Around half of employees are projected to have an income between minimum to moderate. 

Hitting your pension goal

The most common way to save for retirement is with a pension. If you are employed by somebody else, the earlier you (and your employer if they match your contributions) start saving into your pension pot, the less you will need to save each month as the cost is spread over an extended period. 

Private/personal pensions

Set up by individuals rather than companies, a private or personal pension is often used by, but not limited to, the self-employed. It offers generous tax relief, even on significant savings – the lifetime allowance for the tax year 2021/22 is £1,073,100, without triggering an extra tax charge. 

Happy to help

Putting your funds aside for retirement is essential. While pension-specific wealth management can get a little complex, it is vital that you fully explore your options early so you can reap the benefits in later life.   

Essentially, you should treat your pension as an asset, and asset protection is all about planning. Effective planning ensures that no matter what happens, you will remain in control of your assets.

If you’re interested in finding out more about asset protection and would like to discuss your specific requirements, get in touch with Turner Little today. Our specialist team of experts will take the time to meet with you and discuss your individual objectives in detail to provide you with a truly bespoke package. 

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.