Look forward to the golden years

Start planning for a happy and healthy retirement How much money do you need to retire?

I am often asked this, once people know what I do, and although it’s a simple question, the answer can be rather complex.

The clever folk at Fidelity have done some research, however, and their views can act as a useful barometer for your pension planning.

How much you need to save all depends on when you want to retire and what you want to do when you get there, of course.

But Fidelity has crunched the numbers and come up with a rough guide to help you plan for the future.

They found that at the age of 30, you should have one time your salary in retirement funds; at 35, two times; at 40, three times; 45 four times; 50 six times; 55 seven times; 60 eight times; and when you reach 67, 10 times.

Now look at your retirement funds. How do you compare?

Remember, this is a generic starting point to give you a guide – it’s not an absolute. But if you’re way off, it may be worth giving your pension funding some attention.

My own view is that you’re unlikely to want less than these factors of your salary – and it’s very probable you’ll want more.

I have a saying that the best time to start investing was yesterday and the second-best time is today. So, as the new tax year begins, why not commit to start saving more into your retirement fund?

When it comes to how much you should save, in my book, The Money Plan, I recommend you keep the first working hour of your day for your future.

If you work an eight-hour day, that’s the first 60 minutes of your income going into your pension. That works out as 12.5% of your salary and should be your minimum goal.

If you saved 12.5% of your income into your workplace pension, your employer would be adding at least 3% so you’ll have a comfortable 15.5% being invested for your future self. Think of it simply as transferring some of your income now to provide you with an income later, when you will need it most.

We have two key emotions that influence our decisions: pain and pleasure. If we link our pension contributions now with the pain of having less to spend, rather than seeing the future pleasure of a happy retirement, we’ll never get ourselves over the line to make sizeable contributions.

If this is you – if you “can’t see the point” because it’s so far ahead – I recommend two courses of action.

First, take some time to design your retirement: make a list of all the places you want to go and people you want to see.

Second, make it so compelling that you want it now!

Many people don’t start saving for retirement until it’s too late. They then become motivated by the pain of the continued grind of work and retirement – the future pleasure – becomes a means of escape.

But by then, it’s often more difficult to achieve the lifestyle you want as you have less time to build up your pot.

Plan your retirement now and work to your retirement plan.

To learn more about retirement planning and pensions, visit lexingtonwealth.co.uk