How much to save for retirement?  Do I need to start saving now? For most of you reading this, if not all, these questions will have plagued your conscience at some point or another.

Our twilight years are a highly romanticized affair. Extravagant spending gives way to luxurious living and hedonistic indulgence. One minute you’re freewheeling around the Mediterranean, and the next you’re catching up on the countless hours of daytime tv that unceremoniously passed you by over the years. The good life. A time in which we expect to wind down and reap the rewards of our time spent in the working world, many of us have a pre-existent image of what retirement looks like in our heads.

As we get older, however, it becomes apparent that things aren’t always as transparent as they might seem. We may spend our earlier years thinking that whilst distant, retirement is both very enviable and achievable. Wrong. Prepare yourself for some shocking pensions facts you might not be aware of, some of which will no doubt make you reconsider your perspective and just how much to save for retirement.

Pensioners in poverty

The reality of retirement for millions of people is quite stark. According to the British Charity Age UK (2017), 1.9 million pensioners in the UK live in poverty- that is one in six, while a further 1.2 million are “on the brink” of poverty. Research from Saga further solidified these fears, indicating that the UK’s over 50’s population would need to double pension contributions they are making to have anywhere near the standard of living that they expect.

I’m sure you are reading this and thinking “that won’t be me”, but what if something were to happen which stopped you working earlier than you had planned? How many years do you think you could make your pension or savings last in retirement? What would happen if your spouse became ill and you had to look after them? With neither of you working, what would retirement look like then?

The only solution, other than winning the lottery, is to save as much as possible, but how much do you need to save to generate a decent income?

 How much to save for retirement?

This is actually quite a complex question as rates of inflation and interest, among other things, all have an impact. However, based on the pound’s current value, if you kept your money invested after you retired with it generating 6% per year, you would need to have saved £600,000 to achieve an annual income of £50,000 per year for 20 years.

This assumes you plan on leaving none of your pension to a spouse or family member and don’t live any longer than 20 years. But research shows, the reality is most people underestimate how long they will live for and unfortunately, the latter stages of life can be the most expensive.

Whilst there is no definitive value that applies to absolutely everyone, many financial planners agree that you will need about 70% of your current income to keep up to speed with your current lifestyle.

Long-term care

The number of people expected to require long-term care in old age is forecast to grow exponentially over the coming decades, as medicines and cures allow people to live longer, this is clearly great news for you, but probably less so for your finances.

There have been many studies which have looked into this, with estimates suggesting the need for long-term care will double in the next few decades.

The truth is it is increasingly likely people will see out their last days in a care home and this costs money. Without making proper provision or without the savings to cover it, this can sadly mean the loss of a family home, as it sold to cover the costs of care. It is very easy to think of retirement as a far off, distant part of your life for which you can prepare “tomorrow”, but the reality is that to have any hope of achieving the retirement you probably want, you need to put building blocks in places early on in your working life and consider how much to save for retirement sooner rather than later.

A bleak future?

As it stands, retirement is starting to look a little bleak, isn’t it? It doesn’t have to be like this though. Research indicates that property investment is turning out to be quite popular with the over-50s. Research also shows that those who invest in property investment from a younger age can realistically expect a much larger retirement fund than if they were to put all of their money solely into a pension. With Manchester achieving an impressive average rental yield of 6.02%, compared to the 4.86% yield of London,  property investment in the North -and as a whole- has never been more lucrative. A relatively stable and mostly predictable market, you can potentially make great returns from property investment and supplement your pension so that it meets your requirements-not the other way around.

Please remember whilst we do everything within our due diligence to mitigate your risk, your capital is always at risk and your returns may vary. If you would like more information regarding risk or our underwriting procedures, please consult the guides provided.

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If you have any questions or would like to find out more, please contact our member support team at [email protected]