LIFESTYLE | How much should you save for your retirement?Wednesday, 15 June 2016
We’d all like to be financially secure in retirement, but how much should you be saving to make sure you’ve got enough money when you give up work? I've been giving this quite a lot of thought since I turned forty. As a general guide, they say, you should put away as much as you can reasonably afford, even if that is only a small amount. After all, the more money you save, the better off you’ll be once you retire.
When I looked into it, I realised that there are a variety of different ways to save for your retirement in addition to pensions. For example, investment solutions like Quantum from RL360° can be an effective way to build up money to supplement your retirement income. If you’d like more information on these products, you can check out RL360° Quantum reviews and reviews of other options online.
Of course, there will be a limit to the amount you can save on a regular basis. When you’re working out how much money you should be investing for the future, it’s worth asking yourself the following questions.
What will your outgoings be in retirement?
You’ll need to consider your likely outgoings in retirement. For example, are you likely to still have rent or mortgage payments to make after you stop working and will you be supporting any family members? You should also estimate your spending on other essentials like food, cars and utility bills. As well as necessities like these, factor in the sums you’ll want to spend on luxuries like meals out and holidays. By totalling these costs, you should be able to come up with a rough estimate of your projected yearly outgoings. One rule of thumb often used in the finance industry is that someone aged 40 would need around half of their present income to enjoy the same standard of life once they give up work. I found this fact really interesting and a good bench mark to work to.
What sort of state pension can you expect?
Consider the state pension you’re likely to get too. This will supplement any work-based or private pension schemes and separate investments you have. People who qualify for the full state pension and who retire after April this year will receive a flat rate of just over £155 per week, which equates to around £8,000 a year.
How many years of saving do you have left?
Think about how many years of saving you have left before you stop working. The older you are when you start saving for your retirement, the greater the proportion of your income you’ll need to put away. For example, you might be able to expect a decent level of income in retirement if you start saving 12 per cent of your salary at the age of 20, but if you leave it until you’re in your 40s before you contribute to your pension, you might need to pay in closer to a fifth of your salary to get the returns you’re after.
As long as you know what level of retirement income you’re aiming for and you consider these issues, you should be able to work out how much money to save.
Have you started to plan ahead for your retirement?