How Much Is Enough For My Retirement?
When we’re starting out, it’s difficult to look forward forty or so years and imagine the life we’ll be living in retirement, but we can make a reasonable guess that will be near enough to get our planning started. A target of between half and two-thirds of what we’re earning is a reasonable estimate.
As we get closer to retirement, we get a clearer idea of the kind of lifestyle we enjoy and can build more precision into our plans.
Research from the Department for Work and Pensions (DWP) suggest you may need the following income in retirement to maintain your standard of living:
| Salary Range (per year) | Percentage of Salary Needed in Retirement | Replacement Income Range (per year) |
|---|---|---|
| Up to £12,199 | 80% | Up to £9,760 |
| £12,200 to £22,399 | 70% | £8,540 to £15,680 |
| £22,400 to £31,999 | 67% | £15,008 to £21,440 |
| £32,000 to £51,299 | 60% | £19,200 to £31,380 |
| £51,300 and above | 50% | £25,650 and above |
You can roughly work out your own ‘replacement income’ by taking all the things you won’t be paying for once you’re retired from what you’re earning now. This could include things like regular savings, travel to work, pension contributions and mortgage payments.
You may not need to fund this full amount by yourself, if you are eligible for the State Pension, we can take this from your ‘replacement income’ to obtain your shortfall which needs to be met by your savings.
As a rule of thumb, you need to save around 25 times the shortfall. So, if your shortfall is £10,000 a year, you’ll need savings and pensions worth around £250,000 to fill the gap.
So how much will I have for my retirement?
This will all depend on many factors including:
- How much you save personally (plus tax relief)
- How much your employer contributes
- Investment Returns
- Age you start contributing
- Any other pensions you may have
We can provide detailed analysis on how much your pensions may be worth and how much you may need to save to meet your ‘replacement income’ however a great starting point is this handy calculator. (Money Helper)