31 Oct What is a Good Pension Pot For Retirement?
Saving for retirement is vital to ensure a happy and enjoyable retirement. Yet with this in mind, people still ask, how much of a pension do they need for retirement? This is where retirement planning comes into fruition.
It is not easy to know or understand how much pension you may need for retirement. Simply, you should try and save up as much as you possibly can, this is because depending on what age you retire, your retirement could easily last over 30 years.
When to Start Saving For Retirement?
When thinking about saving for retirement it is a good idea to think about how much income you are likely to want and need when you retire. You should think about the lifestyle you would like to lead when you retire, whether you want to travel, any hobbies you would like to take up or time being spent with family and friends.
But how much is it really recommended that you retire with? Well, according to a research done by insurer Royal London in 2018, you would need to look at having a pension pot of £260,000 if you want to lead a comfortable retirement and avoid any difficulties. This pension pot would give an annual retirement income of £9,000 in addition with the new state pension of £8,767.20 a year.
These calculations are made on the assumption of retirement age of 65, and that the pension fund is used to buy an annuity which rises each year to provide some protection against inflation.
Auto Enrolment Pension Fund
Luckily, thanks to the introduction of the auto-enrolment scheme in 2012, people no longer have to guess when to start enrolling in a pension in order to save for retirement as employers must automatically enrol eligible employees into workplace pensions which both the employer and employee pay into.
In this current tax year, 2019/2020 employees must (depending on the definition of earnings that the employer has chosen to base contributions on) pay in 5% to their pension fund and employers 3%. However, if you want to have a more comfortable retirement, you should try to save more and put in more than just the minimum.
Tips For Pension Savers
Here are a set of tips to help you save and plan for your retirement. Follow a few of these and they can help you lead a happy and comfortable retirement.
Supplement Your Retirement Income With Other Income
Adding to your retirement income with another income can greatly enhance the comfort of your retirement. Such ways that you can supplement your retirement income would be to gain interest from other savings and investments that you have placed into, share dividends, rental income from a property you may own or even part-time work if you are wanting to work more.
Don’t Rely on State Pension
Relying on the state pension that you receive when you retire would not give you the most comfortable retirement fund. This is especially because the state pension age is being pushed further and further back, meaning if you are looking to retire earlier than the state pension, you will not receive this until you are of age and therefore need another source of income to be able to retire comfortably.
Get Professional Advice
Seeking professional advice on your pension can be extremely helpful. This is because if you are not sure on how much you should be saving or where your pension pot should be invested then this could all have a serious impact on your retirement income.
Saving enough money to fund a retirement lifestyle that you want to lead can be a daunting task in itself, but here at Aurea Financial Planning, we are the experts on hand to help navigate your options and choices.