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My answer. I do not have a clue! Do you know how much you need to retire?
With me having to seriously consider investing in my future and paying into a private pension scheme; I’ve had to ask myself this question a lot and to be fair I’m still struggling with the answer!
Saving For Your Future
I want to be comfortable but then how do we know what’s going to be ‘comfortable’ in 30 years time?
Here are a few things of which I have been doing to get numbers down on paper:
Instead of guessing how much I would like to have to my name every month and paying more in than I than I will probably need when I retire I am choosing to work backwards with my finances and look at the kind of things I would be then likely to spend my money on.
On one hand, I’m thinking we aren’t going to need what our salaries are/was because we won’t have the bills, overheads or kids that I have to try and afford to pay for now! The mortgage will be paid off and we won’t be commuting as we do now so it’s likely we will only have one car as there would be very little point in having two.
I’m already imagining we will have very different priorities come retirement!
Changing Needs In Retirement
I’d like to be able to go on holiday at least twice per year. Chances are we’d get away a lot more than twice a year if my spends now are anything to go by but we will have no annual leave to contend with, we can be as flexible as we like (I might even end up with the mobile home I’ve always wanted!)
I’ve no doubt we will end up paying more on insurances/our health the older we get and without sounding morbid I think it’s also safe to say that I will ‘need’ more at the start and less near the end… being realistic its unlikely I will be traveling long distances by the time I’m 85!
Is your Pension on track?
The other thing I’ve thinking about is it how far will the state pension actually go in 30 years time?
The state pension is rising to £8,767.20 in April 2019. To me, that’s already a lot of money especially if there are two of you in a household claiming but even as that increases over the year… I don’t suppose it will get us much come 2054! 30 years is a lot of years!
I won’t be able to draw that state pension until I am 68 which I really don’t particularly want to wait for; I think I would personally like to get that up to at least £15k/annum. Baring in mind my old MoJ pension and the fact that I am going to soon start taking steps to contribute into a personal pension scheme I would want to get that up to £20k but my target right now is £15k annually.
How To Boost Your Pension Savings?
PensionBee’s pension calculator page suggests you should look at having between a half and two-thirds of your current salary in your retirement pot.
Now the £15k that I’m aiming for is way more than what my part-time salary was and slightly less than my full-time salary EVER has been but by going higher than I need to and working freelance as I am now; I don’t have to be worried if one month I can’t pay into my private pension or if I feel I can only pay in a small amount then I will still be contributing.
By using the pension calculator I can then work out how much I should be saving to achieve my £15k aim. It allows me to take into account my current pension pot, an employer contribution (if applicable) and also lets me adjust my age now and my retirement age.
To give you an idea of calculations; if your annual salary is currently £30,000 (which I wasn’t anywhere near!) then £20,000 per year would give you, in my opinion, and in the north of England, a pretty healthy retirement income. If you’re likely to be eligible for the full state pension (currently £8,546.20 per year) then it also includes the full state pension in it’s calculations too but doesn’t have to if you don’t feel like you will be eligible or for whatever reason you wish to disregard it.
Budgeting for retirement
As I’ve already mentioned, on one hand I DO want to enjoy my money now because you just don’t know what’s around the corner and with the kids being as young as they are they are taking up most of it to be fair but then I also want to be comfortable when we retire and not worry about the heating bills or affording to do things so the earlier I can start to contribute the better… ideally!
Right now and the way that this digital world is taking us I can see me still working well into my 60’s to be fair but doing this research and getting it down on paper has at least helped me get a few more answers to my burning questions and has also allowed me to now set a target meaning I now have a much better idea than ever before of how much I need to retire.
I do hope it’s helped anyone wondering the same! Let me know your thoughts on how you are working out how much you’ll need to retire & feel free to PIN to read again later!