{"id":8553,"date":"2022-06-29T15:52:03","date_gmt":"2022-06-29T14:52:03","guid":{"rendered":"https:\/\/www.2020financial.co.uk\/?p=8553"},"modified":"2023-08-03T12:40:47","modified_gmt":"2023-08-03T11:40:47","slug":"recommended-retirement-savings-by-age","status":"publish","type":"post","link":"https:\/\/www.2020financial.co.uk\/recommended-retirement-savings-by-age\/","title":{"rendered":"Recommended retirement savings by age"},"content":{"rendered":"\n

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

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\u2019s 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.<\/strong><\/p>\n\n\n\n

Age<\/td>Recommended retirement savings<\/td>Recommended retirement savings based on UK average salary 2023<\/td>Average UK private pension pot size by age 2022*<\/td><\/tr>
By age 30 <\/td>1 x salary <\/td>\u00a333,696<\/td>\u00a39,500<\/td><\/tr>
By age 40 <\/td>3 x salary<\/td>\u00a3101,088<\/td>\u00a330,600<\/td><\/tr>
By age 50<\/td>6 x salary<\/td>\u00a3202,176<\/td>\u00a381,200<\/td><\/tr>
By age 60<\/td>8 x salary <\/td>\u00a3269,568<\/td>\u00a3189,700<\/td><\/tr>
By age 67<\/td>10 x salary <\/td>\u00a3336,960<\/td>\u00a3190,000<\/td><\/tr><\/tbody><\/table>
Recommended retirement savings by age<\/figcaption><\/figure>\n\n\n\n

*ONS<\/a> Average Private Pension pot size Figures Jan 2022<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\"chart<\/figure>\n\n\n\n

Retirement savings by age 20<\/h2>\n\n\n\n

Saving for retirement is probably the last thing you\u2019re thinking about in your 20s, but it\u2019s incredibly important to factor it into your budget.\u00a0<\/p>\n\n\n\n

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, <\/strong>especially before mortgages, career breaks, and school and university fees start coming into the mix.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

Thanks to auto-enrolment, if you\u2019re working full time, you\u2019ll automatically be enrolled into your employers\u2019 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)<\/p>\n\n\n\n

What a lot of young people don\u2019t realise is that Employer contributions are like a pay rise they\u2019re 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.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\"how
How pension tax credits work<\/figcaption><\/figure>\n\n\n\n

Recommended Retirement savings by age 30<\/h2>\n\n\n\n

If you haven\u2019t started saving into your pension in your twenties, you will 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.<\/p>\n\n\n\n

Experts suggest saving<\/strong> at least 1 x your annual salary by age 30. Depending on when you start saving, you\u2019ll want to save between 12-20% of your earnings into your pension (save towards the higher end if you\u2019re starting late).<\/strong>\u00a0<\/p>\n\n\n\n

Don\u2019t 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.<\/p>\n\n\n\n

Your 30s is the age you\u2019re most likely to start your own business<\/a> in the UK. Many business owners don\u2019t 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<\/a> you can both build your pension pot and reduce your business tax liability perfectly legitimately.<\/p>\n\n\n\n

RELATED: PENSION CONTRIBUTIONS FOR BUSINESS OWNERS<\/a><\/p>\n\n\n\n

Saving for retirement in your 40s<\/h2>\n\n\n\n

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.<\/p>\n\n\n\n

Your 40s is a good time to take stock of your retirement plans, especially if you’re hoping for early retirement. It\u2019s worth sitting down with a financial advisor to check:<\/p>\n\n\n\n