Saving for retirement is something everyone must do. However, it can be difficult to know how much you need to have saved to continue with the standard of living in later life.
Even people actively planning for retirement can get confused as to how much they will need saved for retirement. For a general idea of how much you may need see our calculations below.
You will first need to figure out how much you are spending now. Take your monthly earnings and take off taxes and any savings you make. Then see how much you spend on goods and services for the month.
The next step is to find out what you won’t be paying for once you retire. This could be your mortgage payments (as long as it is paid off by the time you retire). Other expenses you can take out is work related expenses, things like fuel costs or train tickets. Provisions for children should also reduce in your later years as well. If you note all of these figures down, it will make the final figure you need as retirement income easier to work out.
Once you have these unnecessary costs figured out you just need to take these away from your monthly expenditure figure. This figure will give you a general understanding of how much you’ll need to maintain your current lifestyle. Note that this doesn’t take into consideration any care fees that you may need to pay in later years and the figure is only a general guide.
The main aim for your retirement is to comfortably maintain your current lifestyle. If your objective in retirement is to travel the world or live a life of luxury you will inevitably need to save a lot more. On the other hand, if you are someone who wants a simple and quiet retirement and can live frugally then you won’t need to save as much. The key is to have enough saved for any eventuality. You should also consider how much your partner is saving and how much their expenses will reduce in retirement.
Some people may also continue working part-time in retirement as a way to top up their pension income. This can be a great way to earn a little extra in retirement, however your full retirement plans shouldn’t revolve around work. One thing to keep in mind with this is that there may come a time when you have to stop work due to redundancies or through illness.
The key message to take away from this is to create a plan for retirement. Figure out what payments you will have to make, the expenses that won’t be incurred once you are retired and think about the sorts of things you would like to do once you are retired and how much this will cost you.
If you are looking for more help and guidance, get in touch with us on 01609 760960. Or arrange a call back and one of our financial advisers will be happy to help.
Reference – BL080 – Sep – 2019