How Much Money Will Your Retirement Need?

How Much Money Will Your Retirement Need?

A feature article by Matthew Pressman, Apr 19, 2008

Summary:
We all have a vague idea that we should have a pension to provide for our needs in retirement, but very few of us actually look at the figures involved. Here’s why we should.

If you have a pension scheme that you are paying into every month, your retirement years will be well taken care of. Does that statement sound right or wrong? In truth it could be either. The ability of your own pension to provide for you after you get your gold watch depends purely on how much you have paid into it during the years you have spent at work.

The fact is, there is so much conflicting – and confusing – information around concerning pensions. Many of us have been lulled into thinking that all we need to do to get the retirement we want is to pay into either our company pension scheme, or a personal pension scheme. More and more people are realising that the government’s state pension scheme won’t be enough to see us through our retirement, and in any case the chances are the state scheme won’t last forever anyway.

But it’s not just having a pension that’s important – it’s what you pay into it that determines the amount you’ll have to live on when it finally starts paying out at retirement age.

In this respect, it should be remembered that pension plans are only as good as the amount of money you pay into them over your working life. The earlier you can start paying into a pension the better, and the more you can pay in each month the faster your pension pot will grow.

To determine how big your pension pot needs to be, you need first of all to decide what level of income you want to receive each year. There are many online pension calculators that will help you to figure out how much you need to be paying into your fund every month to achieve the income you want in your retirement. You also need to bear in mind that the older you are when you start your pension, the more money you will need to pay in to reach your desired goals.

The figures you arrive at may be frightening, but they are the first essential step to deciding how best to approach your retirement. Bear in mind that most people achieve several promotions during their working life, which will bring in more money to be invested for their retirement. But the more you can put away now, the better your financial situation will be when you stop work for good.

The moral here is that it’s never too soon to start paying into that pension scheme. The longer you leave it the more you’ll have to invest to catch up – and you might even end up settling for a smaller pension altogether.

Today really is the best day to begin, so start crunching some numbers now.

Disclaimer:
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.

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