“The earlier you start contributing to a pension the better”
We have all heard this phrase before, but is this an inconvenient truth?
The good news since the introduction of auto enrolment is most workers from age 22 are automatically saving for retirement. It’s a great start and sets a pattern of good behaviours for people. But, we know there are other things competing for your money such as nights out, Deliveroo, holidays and saving for houses…
Here are a few important things to consider about the cost of retirement:
Depending on your age the basic state pension will not be available until Age 67 or even 68. If you were starting to receive today the most you could get would be £203.85 per week.
No one has any idea whether the retirement age might rise again, or even if it will be available in 20-30 year’s time. It’s a good idea to check your state pension forecast. Use the government gateway to see how much you are entitled to, since it is depends on your National Insurance record.
The old rule of thumb was 2/3rd of your final salary.
Generally in retirement you will” hopefully” have repaid mortgages and other debt so your outgoings should be less.
It’s been said that if you want 2/3rds pension income then you need to half your age and add a percentage sign as the amount of salary you need to contribute per year? Don’t worry we are not advocating that, but it gives an easy illustration of what might be required.
It’s also important to consider what are your dreams and aspirations for retirement. Everyone is different and it could be a world cruise, visit long lost relatives in Australia or something more simple!
Valuable tax reliefs are available, providing an uplift to your pension savings along the way.
Average UK Life Expectancy is currently around 85. So, if you are considering retiring at say 57, you could have to make your money last for at least 28 years and hopefully more!
So, the outcome of the above is you may have given up hope and think your ideal retirement is unachievable. Hopefully that isn’t the case! With the right advice or guidance you can set a plan in place to achieve your desired retirement or be prepared for the retirement you can afford.
We are at hand if you need any advice saving for your retirement. Even if you have plans already and just don’t know if they are working for you, we can help. Just get in touch and talk about the cost of retirement for you.
Remember as Albert Einstein called it the eighth wonder of the World “the power of compound interest” will help you on your way.
The more you pay and the earlier you do it the better!
If you’d like to talk to one of our independent pensions advisers in York, please get in touch.
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