How much do you need to save before you can retire?
Working out how much you need to save before you retire can be quite a daunting challenge, but it doesn't need to be.
Firstly, you need to decide what you will need to pay each month. Paying off your mortgage, alongside any other debts before retiring, can free up a great deal of money each month.
Some things you may need to pay out each month:
- Mortgage/rent
- Household bills – like gas, electric, council tax, etc
- Food
- Travel
After you have worked out what you will need to pay for, you can then start to think about things you would like to do. They may include:
- Holidays
- Long overdue maintenance on your home
- The purchase of a second home
- Gift/loans to children and grandchildren
- Establish an emergency fund
- Medical insurance
Once you have worked out a ball park figure per year, you then need to think about how long you need the money to last. Would you like to leave money to loved ones? So, if you need an income of £20,000 per year and want it to last 20 years, you will probably need a pot of around £400,000.
Don't forget to take inflation into consideration. £250,000 in 2017 buys a great deal less than it did in 1987.
Below is a list of outgoings that are likely to stop at retirement or during the run-up:
- Pension contributions
- National insurance contributions
- Life insurance premiums
- Expenditure relating to your children (if they are no longer dependent on you)
- Income protection premiums
Taking this all into consideration is a good place to start thinking about how much you will need during retirement. And, if you can afford to, it can't hurt to save a little bit more.
If you would like to top up your pension, please contact Sarah Culver or 020 7384 7300.