Archived articles
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How much do I need to retire?
Secure Your Retirement: How Much to Save and Why Your Pension Matters
So, how much do you need to retire?
This is one of the most frequently asked questions when it comes to retirement planning. The short answer is it depends on your unique circumstances, goals and what stage of life you’re at.
Of course, the sooner you can start saving, the longer your money is invested and the more potential it has to grow over time – taking advantage of compound interest.
Why are pensions so important?
A pension is a long-term saving plan designed to give you an income when you stop work. It comes with a lot of tax benefits:
- You pay into it
- Your employer pays into it (if you are employed) and you get tax relief from the government
For example, £80 saved becomes £100 with tax relief!
The Pensions annual allowance is the maximum amount that can be paid into a pension each tax year. This Includes contributions from yourself, your employer, any third party as well as tax relief paid to the pension. The current annual allowance is £60,000. However, you'll only personally get tax relief on contributions up to 100% of your earnings if your earnings are less than the £60,000 annual allowance.If you are employed, you will be automatically enrolled into the employer scheme.
Let's talk risk.
In general, people who take more investment risk can expect higher returns on their savings, so they may be able to get away with saving a bit less. You can opt for higher risk portfolios within your pension.
But higher risk investments don’t always lead to higher returns, and a fall in the value of your pot close to retirement may force you to save a lot more, work for longer or leave you short when the time comes.
How much do YOU need to save each month?
As mentioned at the start of this article, this will be unique to everyone. We use a cash flow planning tool with our clients, which allows us to work together to establish how much they can comfortably contribute each month, each year, up until their retirement.
Remember, it’s never too soon, or too late to start paying into your retirement fund. Over time, your money can benefit from compounding and could add a large amount to your pension pot.
Get in touch and we can help establish a realistic financial plan for your retirement goals.
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 depends on individual circumstances.
Auto-Enrolment products are not regulated by the Financial Conduct Authority.
By Steven James
Financial Adviser
HJP Chartered Financial Planners
To find out more about Steven, click here.
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