Guaranteed employer pensions and other financial safety nets are not as robust as they once were, so aging Britons are called upon to absorb more of the burden keeping retirement schemes in place for older members of UK society. As a result of the added pressure, many adults are worried about living a comfortable retirement, without sacrificing too much of their younger days cutting back on everything, just to build a nest egg for old age.
With uncertainty and economic worry on the rise, people of all ages are asking: What’s the right amount to save for retirement. The answer doesn’t come in a single figure. Instead, there are several factors at play influencing the best approach for each individual.
While there’s no “magic” number to hang your hat on, there are questions to ask and moves you can make to analyse your retirement needs and strengthen your financial future.
Where Do You Stand?
Anytime you assess your finances, including retirement savings needs, it’s a good idea to evaluate your present position. If you’re a high earner with substantial resources, your retirement funding needs are likely to be different than those with less money to fall back on. If you’re arriving late to the party, without previous pension savings working in your favor, your focus should include making up for lost time.
What Are Your Lifestyle Expectations During Retirement?
The amount of money a person needs to make ends meet is directly relative to the lifestyle he or she leads. If you plan to carry extravagance into your golden years, you’ll need more money saved to maintain the lifestyle, than someone seeking only a modest existence.
Before setting savings goals, it’s important to identify things you can live without, compared to retirement spending you can’t eliminate from your budget. As you reconcile the figures, consider that a modest standard of living during retirement provides basics, without worry over things like food and shelter, but won’t provide much additional cash flow for extras.
A comfortable retirement, on the other hand, provides enough financial insulation to accommodate some of life’s enjoyable extras, such as travel and occasional decadent treats. Wherever you settle, identifying a retirement lifestyle suitable to you, remember that loans are offered online, which can help with day-to-day expenses, while you set by cash for retirement. Most of these fast funding opportunities require pending paychecks to qualify, so you may not qualify after leaving your job.
How Much Money is Enough?
It can be hard assigning an exact figure to your future lifestyle projections, but online pension calculators and help from a financial advisor can make the picture clearer. One study suggests that each pensioner will require an additional £260,000, above and beyond a full State Pension, in order to live comfortably during retirement.
The figure, brought forth by Royal London, has risen by £100,000 since 2002. Abysmal interest rates and increased life expectancy have both contributed to the disparity. UK savers are nowhere near achieving the savings goal, with individuals 45-54 thought to have saved around £70,000, on average.
Workplace pension schemes have helped about half the workforce make positive strides, lifting them to a savings pace that may preserve their lifestyles after leaving the workplace. But for many other working Britons, minimum pension payments won’t be enough to buoy their finances. Many observers are calling for the government to act by pushing the minimum contribution level upward.
High housing costs and young people struggling to get on the property ladder don’t bode well for retirement security. It is thought an individual who still rents at their time of retirement will need close to half a million pounds to carry-off a retirement lifestyle similar to that of someone earning £27,000 on the job.
The promise of a comfortable retirement is firmly in your hands, with fewer financial safety nets to protect you. If you’re worried about your financial health during retirement, consult a planning expert and redouble your efforts to put by money for the future.