SJP How much money do I need to retire?
Always a tricky question, because how much money you’ll need will depend on what you want to do with your money when you retire. And how long you’ll need your money to last. None of us has a crystal ball – but we can make sure we’re prepared for the short- and long-term.
To help answer the first question, try starting at the end. What do you imagine you’ll be doing when you retire? Where do you want to live? Do you plan to travel? Help your children and grandchildren get a great education?
We’re happy to help you put a ‘price’ on a long and happy retirement – and create a personal retirement savings plan to get you there. Just get in touch with a St. James’s Place Partner. Knowing what your goals are, and that they’re achievable, will create financial wellbeing in later life.
How much money do I want to have saved by the time I retire?
If you want to put a general figure on how much money you might want by the time you retire, a good starting place is using multiples of your salary.
Don’t forget to factor in several decades of inflation. And of course, you may live to be 100, although you won’t necessarily be living the same lifestyle as you plan for your 60s or 70s.
Another way to calculate how much you want is to work from a percentage of your earnings. For example, 10% in your 20s, 15% in your 30s, 20% in your 40s and so on.
Saving that amount of money can seem like a big ask. Especially when you don’t know what else life may throw at you in the intervening years. But, if you currently have a workplace pension, it won’t just be your money going into your pot. Your employer may contribute, you’ll get tax relief, and the longer you’re able to save, the more your money will benefit from compound interest. ‘Compounding,’ Albert Einstein once said, is the ‘eighth wonder of the world’.
Can compound interest help me save for retirement?
Absolutely. Compound interest, or ‘compounding’ means that any gain you make on your investments will be reinvested, so you’ll have more money generating more interest over time. Think of it as the ‘interest on the interest’. It’s easy to see how compounding can really boost your pension pot, over the years.
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 is dependent on individual circumstances.
Could I retire at 55?
You can access your pension savings from age 55 (rising to 57 in 2028). Your State Pension won’t kick in until state pension age, which could be 10 years later, but if you have saved a pension pot, you can draw on that much earlier.
It’s worth remembering, though, that you may well live into your 80s, so you’ll need to plan your pension and retirement income so that it lasts as long as you need it to.
How do I know if I’ve saved enough in my pension?
You can use the methods above as a starting point, but no two retirements look the same, or cost the same. It’s very helpful to talk through what you want from your retirement with your financial adviser.
Our plans change over time. You may decide you want to retire earlier or keep working for longer. You may change your mind about which country you want to live in. So your retirement plan needs to flex with you, and the amount you need may need revisiting.
You can talk to your St. James’s Place adviser at any time – especially if your circumstances change – but we’ll always review your plans and financial situation once a year, if not more often.
Have I left it too late to start saving for my pension?
Even if you’re reading this in your 40s or 50s, don’t panic! You’re not the first person to start saving a little later in life, and you still have options to get started. Speak to your St. James’s Place adviser and together you can create a retirement income plan that you can achieve.
Knowing that you have a plan in place will help you feel that you’re in control of your money, not the other way around.
What next?
Planning for your retirement can seem a little overwhelming when you first ‘do the numbers’. We’re always here to help you plan because everybody deserves to enjoy a wonderful retirement.
Need help with reviewing your existing pension plans? Just get in touch with us today.