How much do I need to save for retirement?

How much do I need in my pension pot to retire? It sounds like a simple question and one that should have a straightforward answer. Unfortunately, like other aspects of financial planning, it can be a bit more complicated.

A quick search online produces a number of total pension pot figures, pension calculators, and percentages of monthly salaries into pension pots.

The problem is many of these estimates tend to fail to recognise one important point – no two retirements look the same. There are a number of considerations, such as current financial circumstances, age, risk appetite and desired retirement lifestyle that retirement planners must consider first.

Let’s take a look at some of the factors you need to consider when planning for retirement.

Lifestyle

One of the most important things to think about is the kind of lifestyle you’ll want in retirement. Holidays, eating out, shopping, all spending habits should be considered.

A good place to start to work this out is the Pensions and Lifetime Savings Association’s Retirement Standards. These figures are based on independent research by Loughborough University and paint a picture of what a minimum, moderate and comfortable lifestyle could look like in retirement. They break down the potential costs of home maintenance, food and drink, transport, holidays and leisure, clothing, and helping others.

Age of retirement

Deciding what age you plan to retire will have a big effect on the amount you’ll need to save. Of course, the longer you postpone your retirement, the more your pension will grow. Retiring later in life will also mean you’ll have less time without a regular salary to consider and fund.

That said, retirement doesn’t have to be a case of working until a certain age then finishing work. There is a growing appeal of a phased retirement with people reducing their hours to part-time for a few years first. This has become more increasing prevalent with the rise of remote working.

Seeking advice

Bringing together your current assets, retirement aspirations, and the age you want to wind down to produce a retirement strategy can be an overwhelming task. This can be made more stressful if you feel like your savings are not where they should be.

The good news is that this need not be a solo undertaking.

An independent financial adviser such as our team at My Pension Expert is on hand to help. We assess an individual’s financial situation and retirement goals to offer the best, personalised advice to create a retirement plan that helps achieve their desired lifestyle.

This could involve creating a phased retirement plan or helping choose an investment product that could provide their savings an added boost. An adviser can guide savers through the options as well as helping them understand the relative risks of each approach.

Instead of thinking of retirement as a single figure, consider it an ongoing planning process. With a thorough retirement plan and regular reviews, savers put themselves in the best possible place to make their retirement dreams a reality.