How much money is enough, and how much income will your pension savings give you in retirement? Tough questions, and more people are using retirement income targets to help work through the numbers.
What you contribute to your pension over a number of years will determine whether you have a minimal, modest or comfortable income when you retire.
That’s a big deal if you hope to continue enjoying the living standards you’ve had while working. But it’s crucial that people understand what they need to save and invest to achieve different outcomes in retirement.
Investment thinking from down under
One line of thought has emerged from Australia. Our friends down under believe that people need help when planning their financial futures. We’d certainly agree with that.
This is also supported by a recent survey from the Pensions & Lifetime Savings Association (PLSA). Four out of five people they contacted are not sure if they are saving the right amounts to achieve the pension outcomes they hope for.
Results showed that people think that having clear financial targets to aim for would be beneficial in later life.
In fact, seven out of ten pension savers would like to see retirement income targets more readily available and properly explained. This would make it much clearer what amounts should be saved each month.
The PLSA had concerns. in particular, over half of respondents thought that the UK government’s auto-enrolment minimum pension contribution was the appropriate amount that should be saved.
This initiative was only ever a starting point. It was something to better prepare people who otherwise might have no other provision aside from the state pension. In reality, they must save much more than this.
What levels should be saved for retirement?
Knowing what you need to save now, tomorrow and ten years down the line will have a positive impact. It will affect the income you can enjoy when you reach retirement age.
The PLSA believe that between 2025 and 2030, people should be saving around 12% of salary. This will help to avoid future financial disappointment.
Such retirement income targets would avoid any panic. When people reach their late 40s and early 50s, they will have a better understanding about what income will be available in retirement.
How to calculate your pension needs
Trying to work out exactly what income you will need at 55, 60, 70 or 80 years of age can be tricky. Circumstances change, and what you want from life is also likely to change as you get older. The goal posts move.
Without taking professional independent advice, it can be hard to know if you are saving enough for your retirement – whatever age you choose to do so. This can be true even when you have set yourself targets.
Logic Wealth Planning brings many years of experience to the table. We have seen countless scenarios and helped many people find the savings balance that is right for them.
Referring to previous savings examples, knowing the market and applying the latest technology to support recommendations is all part of the mix.
There is no magic formula. However, listening to a client’s story and understanding what they hope to achieve is always a good starting point.
If you’d like a few wise words about money, savings and retirement planning please give us a call. We’ll start the process with a jargon-free, no obligation chat so you can consider your options.
Call 0808 1234 321 now.