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Recommended retirement savings by age

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    Typically a comfortable retirement is one that allows you to maintain your pre-retirement lifestyle in retirement, so an expert study has set out recommended retirement savings by age based on your annual salary.

    As a rule of thumb, you should aim to save 10x your salary by the time you reach state retirement age. To stay on track with your retirement savings it’s recommended to have saved at least 1 x your salary by the age of 30, 3 x your salary by 40, 6 x your salary by age 50 and 8 x your salary by age 60.

    AgeRecommended retirement savingsRecommended retirement savings based on UK average income 2021Average UK private pension pot size by age 2022*
    By age 30 1 x salary £31,772£9,500
    By age 40 3 x salary£95,316£30,600
    By age 506 x salary£190,632£81,200
    By age 608 x salary £254,176£189,700
    By age 6710 x salary £317,720£190,000
    Recommended retirement savings by age

    *ONS Average Private Pension pot size Figures Jan 2022

    If this retirement savings target seems out of reach, we explore how you can optimise employer contributions or self-employed or business owner pension contributions and pension tax credits to maximise your money.

    Retirement savings by age chart

    Retirement savings by age 20

    Saving for retirement is probably the last thing you’re thinking about in your 20s but it’s incredibly important to factor it into your budget. 

    In fact, due to the compounding effect of investment growth over time, your 20s might be the most important time to be saving for retirement, especially before mortgages, career breaks, school and university fees start coming into the mix.

    There’s no set recommendation for retirement savings by age 20 but if you’re going to meet the recommended retirement savings levels for your 30s, 40s and beyond the trick is to start early and save consistently. Save between 8-12% of your earnings (including employer contributions) and you should be on track to a comfortable retirement.

    Thanks to auto-enrolment, if you’re working full time, you’ll automatically be enrolled into your employers’ pension scheme. Make sure you take advantage of the benefits on offer to you and maximise your pension contributions to receive the maximum amount of Employer contributions. The minimum your employer must pay into your pension is 3% (with you paying 5% of your earnings)

    What a lot of young people don’t realise is that Employer contributions are like a pay rise they’re leaving on the table – it makes sense to take the maximum amount from your employer. Very few people would ignore a 3% pay rise and some employers’ pension contributions are much more generous.

    Plus, when you pay into a pension, you receive pension tax relief from the government, so it actually costs you less to pay into your pension than you think.

    how pension tax relief works for earners in different tax brackets
    How pension tax credits work

    Recommended Retirement savings by age 30

    If you haven’t started saving into your pension in your twenties you’re going to need to save more than the minimum 8% auto-enrolment amount. A report from the Pensions Policy Institute suggests that most people actually need to save closer to 12% for a comfortable retirement.

    Experts suggest that you should aim to have saved at least 1 x your annual salary by age 30. Depending on when you start saving, you’ll want to be saving between 12-20% of your earnings into your pension (save towards the higher end if you’re starting late). 

    Don’t forget, your pension contributions are taken before you pay tax and some of what you save will be employer contributions – so it may not cost you as much as you think to maximise your retirement savings.

    Your 30s is the age you’re most likely to start your own business in the UK. Many business owners don’t realise that their business can actually pay into their pension on their behalf. By taking advantage of pension contributions for business owners and self-employed you can both build your pension pot and reduce your business tax liability perfectly legitimately.

    RELATED: PENSION CONTRIBUTIONS FOR BUSINESS OWNERS

    Saving for retirement in your 40s

    In an ideal world, you should aim to save at least 3 x your annual salary saved into your pension pot by age 40. Even if you don’t start saving for retirement until you reach your 40s you still have almost 30 years until you reach state retirement age, so you have a decent amount of time to save towards your retirement.

    Your 40s is a good time to take stock of your retirement plans, especially if you’re hoping for early retirement. It’s worth sitting down with a financial advisor to check:

    • Are you saving enough?
    • Are you maximising employer pension contributions or business pension contributions?
    • Is your pension invested appropriately?
    • Are your investments performing as well as they could?

    It’s worth noting that the average age for divorce in the UK is 46.4 for men and 43.9 for women. If you do get divorced in your 40s it’s essential to ensure that any pension wealth is shared equitably. 

    woman calculating how much of her husbands pension she is entitled to in divorce

    Women, especially those who have taken career breaks to raise a family, often come off worse when it comes to pension wealth in divorce and in a frighteningly large number of divorces, pensions aren’t even discussed. Make sure you understand your options and rights when it comes to pensions in divorce.

    Divorce can be an emotionally exhausting experience, but it’s vital to sit down with a financial advisor as soon as possible afterwards to take stock of where you’re at financially and come up with a plan for your future. It can be incredibly empowering to do so and it might help to relieve any stress around your finances.

    RELATED: WHAT HAPPENS TO PENSIONS IN A DIVORCE

    Saving for retirement in your 50s

    As you reach your 50s and edge closer to being able to access your pension at 55, you may find that your thoughts start to turn to retirement more frequently.

    Saving for retirement in your 50s should be about finessing your plans and topping up your pension where needed to make sure you can achieve your retirement goals. You’ll want to have around 6 x your annual salary saved as you reach your 50s, so if you’re short of that figure, now is a good time to take action whilst you’re still working.

    Your 50s is also a good time to check that you’ve maximised your National Insurance contributions. You’ll need a total of 30 qualifying years of National Insurance contributions or credits to qualify for the full state pension, and since this makes up a large proportion of most people’s retirement income it’s worth having.

    If you’re short of qualifying years or credits, it may be possible to pay to top-up partial years (only full years of contributions are counted) and in most cases, it’s generally worthwhile doing so.

    RELATED: ARE YOU SAVING ENOUGH FOR RETIREMENT

    Investment risk in your 50s

    How your pension is invested can change over time and if you’re saving into a pension it’s important to check how that pension is invested. It’s important that your investment strategy matches your goals and retirement plans and doesn’t just follow the scheme default. 

    Many pension schemes will automatically put you in lower-risk (and typically, lower return) investments as you approach retirement, a practice known as “lifestyling – in some cases, this is wholly appropriate but in others, it can result in you losing out on potential investment returns unnecessarily. It’s always worth checking with a financial advisor to see what’s best for you.

    woman planning for retirement with retirement budgeting list

    Saving for retirement in your 60s

    A 2021 Sunlife poll showed the average age for early retirement in the UK was 59, however for those of you not lucky enough to consider early retirement your 60s is a great time to top up your pension pot before you do retire.

    Once you start drawing an income from your pension the amount that you can pay into your pension and receive tax relief drops dramatically. Saving for retirement in your 60s should focus on maximising your savings, reducing any debts and topping up your pension pot before you retire.

    You should be aiming to have saved 10 x your annual salary by age 67 to give you a comfortable retirement.

    Hopefully, you’ll have fewer demands on your cash from children and if you’ve paid off your mortgage you can redirect that cash towards your retirement fund.

    Historically, people expected to be mortgage-free in their 60s and had more disposable income to direct towards topping up retirement savings. 

    If you fall into the 52% of people who don’t expect to pay off a mortgage until you’re well beyond your 65th birthday and your retirement savings aren’t where you’d like them to be then you may have to look at other ways to fund your retirement

    Retirement Savings Example: UK average income

    We’ve set out what these recommendations look like in reality, using the current average UK income of £31,772.

    As the chart below shows, you’d have target retirement savings of £31,772 by age 30, £95,316 by age 40, £190,632 by age 50, £254,176 by age 60 and £317,820 by age 67. (The current state retirement age is 66, but it is moving to 67 by 2028).

    If you’re wondering what those savings equate to in retirement income: A pension pot of £317,720 could reasonably provide you with an annual income of around £12,700 in retirement. If you qualify for the full state pension currently £185.15 a week (correct as of June 2022) you could expect to earn around £22,300 per year from your pensions in retirement or around 70% of your pre-retirement income.

    Target Retirement savings by age chart - UK average income 2021

    If you compare these targets with the UK’s average pension pot size by age you’ll see that across every age range there is a shortfall between the recommended level of saving and the actual value of people’s pension pots.

    The starkest difference is at age 67, where there’s a staggering shortfall of £127,720, almost double the shortfall at age 60.

    AgeRecommended retirement savings based on UK average income 2021Average UK private pension pot size by age 2022*Pension shortfall
    By age 30 £31,772£9,500-£22,272
    By age 40 £95,316£30,600-£64,716
    By age 50£190,632£81,200-£109,432
    By age 60£254,176£189,700-£64,476
    By age 67£317,720£190,000-£127,720
    Recommended retirement savings by age

    In income terms, this shortfall at retirement age will cost them around £5,000 a year in retirement; since a pension pot of £190,000 would yield an income of around £7,600 versus the £12,700 you could expect from a £317,720 pension pot.

    It’s important to stay the course when it comes to retirement savings, stopping early could have a significant impact on your future wealth.

    But of course, the most important thing with saving for retirement is to start!

    Planning for retirement

    We have a number of retirement planning articles here, retirement calculators and free retirement planning resources available to download here.

    If you’d like to speak to a financial advisor for tailored retirement advice please get in touch and schedule a no-obligation call.

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    Simon Garber

    Simon Garber

    Simon Garber is an Independent Financial Adviser and Pension Transfer Specialist with over 15 years of experience. He's a member of the Personal Finance Society and holds the coveted Gold Standard for Pension Transfer Advice.

    He is the Managing Director of 2020 Financial Ltd, Financial Advisors specialising in Retirement Planning & Wealth Management, based in Southampton, Hampshire.

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