SJP How much money do you need for retirement
This can be a difficult one to answer, simply as everyone is different, and has different needs.
The best way to tackle this is to speak to a St. James’s Place Partner, who will be able to help you work out a retirement savings plan for your individual circumstances.
This question is increasingly being asked by those of you who are reaching retirement, but also the younger generation who are taking control of their finances early. And rightly so.
The best way to approach this question is by starting with the end goal in mind.
How much would you like to have by the time you decide to give up work?
Planning for a 100-year life is an ever-present reality.
It might be difficult to put a lump sum figure on this, as you will need to factor in several decades of inflation. So, it might be easier to start by thinking in terms of having saved multiples of your salary by certain ages, or a percentage of your earnings.
Or alternatively, target a percentage of your earnings, so perhaps 10% in your 20’s, 15% in your 30’s, 20% in your 40’s and so on.
It might seem next to impossible to save those amounts with all that life throws at you, but don’t forget, it’s not just your contributions going in. You’ll receive tax relief, possibly employer contributions, hopefully investment growth, and the compounding effect of saving over the long term.
How can 'compounding' help me?
Compounding is vital to saving for retirement as it generates income, which can then be reinvested to magnify your returns on interest over time. Perhaps better known as ‘interest on interest’.
Albert Einstein once called compound interest the ‘eighth wonder of the world’, why? It is the key to wealth creation and why pensions are a great way to save.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is dependent on individual circumstances.
Can I retire at 55?
You can access your retirement pots from age 55 (rising to 57 in 2028) and use your money however you wish.
Perhaps the thing to bear in mind though, is that we are all living longer on average and ‘retirement’, whatever that looks like for you, could be upwards of 30 years. So when thinking about how much you’ll need to have saved, consider how long it needs to last you as well.
How will I know if I’ve saved enough?
Finding your ‘own number’ will help you focus and have a goal to achieve.
Although it can be useful to use the figures mentioned on this page, everyone’s needs are different. This is where your financial adviser will be able to help you to determine what you want your retirement to look like, and therefore what amount to aim for.
And remember, your retirement won’t necessarily be a fixed point in time or money, it will change as your circumstances change. So, it’s worth having perhaps a multiple of your salary in mind to aim for, but be prepared to amend your objectives if your plans change over time.
Started saving ‘late’? It is never too late!
If you have just started thinking about your pension in your 40’s and 50’s you are not alone.
Of course, the earlier you start the better. However, there are still some steps you can take to work towards achieving your pension saving goals.
What next?
Planning for your retirement can seem quite complex and even a bit overwhelming, but don’t worry we have advice on how you can start planning and budgeting for your retirement.
If you’re thinking of starting a pension or would like to review your existing pension plans, then it’s a good idea to get advice.
Find out how to start saving for your pension
If you’re not sure where to start when it comes to getting your pension off the ground, you can find out more here.
Let us help you find a local adviser
Find a local adviser
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time Tax relief is dependent on individual circumstances.
