"Get the latest tips about how to manage you wealth"
Planning for Retirement? What is the Magic Number?
The stark reality of the situation is that many people are not saving enough. This means that when they retire they simply won’t be able to continue living a similar lifestyle.
There are many reasons why people are not saving enough and understandably, immediate financial concerns become a priority. In some cases, a lack of financial education has played a part in people not understanding what they need to save in order to prepare themselves for retirement.
For many, thinking about their retirement has been difficult, especially when they need to pay the bills of today but if you are planning for retirement, what do you need to save in order to continue living a good lifestyle?
Under the Government’s auto-enrolment worker’s pension in the UK, the minimum contribution is 5% of annual income and while this figure might seem fine to some, it is not really all that close to the real figure. Many experts believe that the figure people pay into their pension should sit at around 13% of their annual income. Much of the deficit would be made up by the employer’s pension contributions but there is still a significant gulf between the savings that people have and what they will actually need.
While people are always advised to obtain professional financial advice, there is a general way of working out what is required for those who want to comfortably retire at 68. This means that they should have around seven times their annual household income. So, when the time comes to retire, if you have a combined household income of £50,000, you would want a pension pot of around £350,000. Of course, the amount will differ from one case to the next but this is a good way of working out what is required in general.
There are some things that can be done in order to boost your pension and that means that you need to take responsibility for your finances because even small changes such as using tax friendly savings accounts can really make a difference. The situation will obviously need to be looked at differently if you have moved abroad and have a pension in the UK. However, it is vital that you do think about tomorrow and give yourself a greater chance of having an enjoyable and well-deserved lifestyle once you have finished working for good.