Article

How much should I save for my retirement?

5 min read 27 Jan 25

Calculating your future needs

Retirement may seem like a distant milestone, but planning for it early is one of the most important financial decisions you can make. Yet, many people delay addressing their retirement needs until later in life, which can lead to uncertainty and missed opportunities for growth.

Research highlights this trend: a survey by Unbiased found that 26% of people don’t know how much they need to retire, and 57% lack confidence that they have enough time to save for the retirement they desire. Understanding how much you need to save is not just a practical matter—it’s key to peace of mind.

This article is here to guide you through this process, offering resources and advice to help you achieve your retirement goals with confidence.

Key components of retirement savings

A secure retirement often draws from multiple income sources. By understanding these components, you can create a well-rounded plan to support your future lifestyle.

Here are the key areas to focus on:

Pension Contributions: Regular contributions to a pension plan are vital. These are often made by both the individual and their employer, with the added benefit of tax relief from the Government.
The State Pension: A cornerstone of retirement income in the UK, the State Pension is based on your National Insurance contributions and provides a foundational level of financial security.
Workplace Benefits: Many employers offer additional incentives, such as matched pension contributions or other savings schemes, which can significantly boost your overall retirement pot.
Personal Savings and Investments: Savings outside formal pension plans—such as ISAs, investment portfolios, or savings accounts—can offer additional flexibility in retirement.

Having different sources of retirement income could help create a more robust financial future. As with any investment, the value can go down as well as up and you may not get back what you put in.

Understanding how much you’ll need to retire comfortably

Estimating your retirement needs requires careful thought about your future lifestyle and circumstances. Here are some key considerations:

Lifestyle Choices: What kind of retirement do you envision? A modest lifestyle requires less income than one filled with travel and luxury.
Life Expectancy: With people living longer, it’s essential to factor in healthcare and potential long-term care costs.
Inflation: The rising cost of living affects the purchasing power of your savings. Planning for inflation can help make your money last longer.
Additional Income Sources: Part-time work, rental income, or other investments during retirement can supplement your savings.

By considering these factors, you can set realistic savings targets that match your retirement goals.

Tools and tips for calculating your retirement needs

Several tools and guidelines can help you estimate your retirement savings needs.

Retirement Contribution Calculators: Online calculators provide tailored estimates based on your current savings, age, and goals.
Budgeting for Retirement: Establishing a retirement budget helps clarify your financial needs. You can find out how to budget for retirement with our guide here.
Income Replacement Ratio: This is a tool some people use to help determine how much money they will need, It’s basically estimating what percentage of your pre-retirement income you'll need to maintain your standard of living after you retire.

Using these tools, you can evaluate your progress and adjust your savings plan accordingly.

Speak to a financial adviser for personalised recommendations

While general tools can help you get started, retirement planning is deeply personal. No two plans are alike, and working with a professional can ensure your strategy is tailored to your unique circumstances.

An adviser from M&G Wealth Advice can help you optimise your retirement savings, navigate tax efficiencies, and prepare for unexpected challenges. Take the first step towards peace of mind by speaking to an adviser today.

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