How much shall I be contributing to my pensions
Obviously the two most important factors in determining how much you should contribute towards your retirement planning are what you want to retire with and how long you have to get to that level. You should therefore ask yourself the following 2 questions:
1. What lifestyle do you want or expect to retire with?
2. How long is it until you plan to retire?
Often financial advisers talk about retiring on 70% of your final salary. With the state pension so low compared to this figure most people need to contribute on an ongoing basis towards their fund for retirement. To know how much to contribute you need to be honest with yourself- do some soul-searching- and answer some questions. You need to work out – What income do you need when you retire? What lifestyle will you want? Are you willing to make sacrifices now to ensure you obtain the standard of living you desire? Remember that when you retire you will have a lot more free time to fill and often filling this time costs money.
A figure that is often thrown around is that people need to invest 5-10% more of their income for every 5 years they delay their contributions. This is well illustrated below:
Age 25: 10-15%
Age 30: 12-17%
Age 35: 15-20%
Age 40: 17-24%
Age 45: 23-30%
Age 50: 32-45%
Age 55: 50-70%
You should work back from what you want and use realistic investment growth estimates to work out what level of contributions will get you to where you want to be when you retire. It is probably best to speak to an independent financial adviser to guide you through the process and give you advice.
Keywords:
How much shall I be contributing to my pension
Pension Review, Pension Transfer Info,
