Today we wanted to look at how to complete a pension review for those of us who dream of a comfortable lifestyle post-retirement. If you are lucky enough to have a high quality of life and like to experience some luxury, it’s important to make sure you save a significant sum to keep you going for the decades after your retirement.
So how do you know if you are ready to retire? What should your pension pot look like? Here’s some pension planning advice to help you complete a detailed pension review.
Planning Your Retirement?
In order to make sure you can continue with the lifestyle you want after retirement, the best thing to do is get your planning done early. The earlier you begin contributing to your pension pot and putting a plan in place, the more likely you are to have accumulated a significant sum when the time comes to retire.
Would you like to retire early?
However, if you want to retire early in life, you are going to need to really hit the ground running. From smart saving to pension planning advice, it’s time to give your pot an in-depth pension review to see whether you will be able to take early retirement.
If you want to retire early, then the actual pot will need to be significantly larger as you will not have your state or work pension to rely on for the first few years of retirement. In this instance, you will need to rely on personal savings accounts.
Have you been saving enough?
Many people live by the ‘multiply by 25’ rule. With this plan, you need to first work out how much you would like to spend annually after retirement. This will depend on your current living situation. First, work out how much you need to spend on essentials, with room for contingency. Say this is £14,000 per year. Then you will need to add in your more luxury spend, for things like holidays, new cars and so on. This could bring your annual possible spend up to £25,000, for the purpose of this example.
If you go by the rule mentioned above, you will need to save £625,000 by the time you retire. This works out at about £13,900 per year saved between the ages of 20 and 65. Of course, this is not manageable for many individuals. However, this is before you take into account your state pension also, which will provide you with around £8,300 per year.
Start planning for the future now
The amount of money you need to have saved in order to retire comfortably and enjoy your newfound time is significant. In this day and age, we need to take inflation and such into consideration, as well as account for uncertainty in terms of the political and economic outlook.