The ultimate question that we wish we had the answer to. If only we had a crystal ball to predict the future of our money, savings and pension. Unfortunately, retirement is the one thing we cannot foresee. We might not have a magic wand, but we do have years and years of historical investment market data to help us plan and make possible projections of what to expect for our retirement. This can be of great help when saving for retirement.
How to determine how much is needed for retirement?
Although it is virtually impossible to determine precisely how much you would need to retire, there are parameters we can use to help formulate a financial strategy for retirement savings.
For example, do you want a quiet lifestyle in the countryside, gardening and visiting family and occasionally eating out and going on short vacations, or do you prefer living in a city and eating out, socialising, travelling frequently, buying a second home for holidays, and joining a country club?
Without considering annual interest and drawdown, if you earn £5000 a month and wish to earn the same when you retire at 65, you will need £5 000 x 12 months for a year = £60 000 x the number of years you would need an income for (people are living longer and are expected to live into their 90’s.) So £ 60 000 x 30 years of retirement (Life expectancy of 95) = £1 800 000 needed (this is only an example and does not take into account that your capital will be earning interest over the 30 years)
While the needed amount would probably be less, it is a good eye-opener of how large a sum you need to accumulate to survive retirement.
Although dealing with many uncertainties, your financial advisor is the most qualified to help plan your retirement and determine a plan of action to build wealth. Time is our greatest saving ally; the earlier we start with investment, the more our capital will grow.
Chat with your financial advisor to revise your retirement savings plan and ensure you have enough saved up to have a financially secure and stress-free retirement.
Please note, the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.