What kind of lifestyle do you want to maintain?
How much you’ll need to retire depends on a number of factors, including how long you expect to live in retirement and what kind of lifestyle you want to maintain.
One of the biggest mistakes you can make is not saving enough for your retirement. This can leave you struggling to make ends meet in your later years, and may even force you to rely on others for financial support. It’s never too early to start saving, and the sooner you start, the better off you’ll be.
The question of whether or not you are saving enough for your retirement is a difficult one to answer. It depends on a number of different factors, including your age, your current income, your anticipated expenses in retirement and the amount of time you have left to save.
Cost of living crisis
According to a new survey, just over a quarter of savers surveyed (26%) who have a workplace pension think that their current amount of pension saving will not be enough to get by on when it comes time to retire[1].
With UK households feeling the pinch off the back of the cost of living crisis, the war in Ukraine and two years of COVID-19 restrictions, savers have reported that they have long-term concerns as to their financial health when they stop working.
Low-income households
In the survey, those aged between 35 and 54 (29%) were most concerned that they wouldn’t have enough to live off, compared to those aged over 55 (20%). Just under a third of women were concerned (31%), compared to one in five men (21%).
Furthermore, 35% of those in low-income households whose total income is up to £14k, and 31% with an income of £14k–£28k, stated their concerns. This figure drops to just one in five (20%) for those in households with an income of over £48k.
Minimum standard of living
One in five people surveyed (21%) who have a pension say that they save into a pension to ensure that they have a minimum standard of living in retirement – a pension that meets all their basic needs.
The findings show that a majority of people save to get either a moderate (41%) or comfortable (33%) Retirement Living Standard. However, far fewer people think their current pension saving will achieve this, with slightly over a quarter (27%) saying moderate and just 14% comfortable.
Reaching your future goals
There are some key questions that will help give you a sense of whether you’re saving enough for retirement. These include: How much have I saved so far? How much will I need to save? What is my expected rate of return? What sources of income will I have in retirement?
Keep in mind that these are just general guidelines. The best way to know if you’re on track for retirement is to obtain professional financial advice to develop a personalised retirement plan and make sure you’re on track to reaching your goals.
Save a little bit each month
No matter what your specific retirement goals are, it’s important to start saving early and often. The sooner you start saving, the more time your money has to grow, and the less you’ll need to save overall.
So if you’re not already doing so, start setting aside money for retirement now. Even if you can only afford to save a little bit each month, it will add up over time.
Source data:
[1] The research was conducted on behalf of the PLSA by Yonder Data Solutions from 10/01/22 to 11/01/22 with a nationally representative sample of 2,093 adults.
