It’s really important to plan for the future. Most of us will live to see our retirement and will want to maintain a standard of living similar to our current one.
However, the majority of over 40’s have no idea what size pension pot they’ll need if they are to live the retirement life they aspire to.
There are two elements to think about when planning funding for retirement. The first is to think about what level of income you want to receive. Ideally, if you want to maintain the same lifestyle, the aim is to have around two-thirds of your working income when you retire.
The second element is to work out what pension fund you will need to generate that income.
Saga Investment Services
According to research by Saga Investment Services, last year many people struggled to know what income they would need in retirement. However, the biggest lack of awareness was in relation to the size of fund required.
As part of the research, people were asked to estimate what kind fund was needed to provide a basic, a comfortable or a luxury lifestyle. These are considered to cost £10,400, £18,600 and £64,000 respectively.
On average, the answers people gave greatly underestimated how much money they would need to produce these figures. Overall, they needed to double the size of the pension pot they thought they needed.
plan to start retirement
Of course, a pension income will be affected by when you plan to start retirement but a good rule of thumb is that you can expect an income of 5% of your fund. So, if you have a fund of £250,000, that should generate an annual income of £12,500.
Whilst none of us knows what the future holds, it’s important to plan ahead where your finances are concerned. As well as maximizing your retirement, dealing with these things sooner rather than later can provide you with peace of mind.
To speak to one of our will writing experts please call Elm Legal Services on 0800 019 4557.