There are many varying factors that make up every individual’s answer to this question. Sadly, there is no “one-size fits all” answer, and seeking financial advice might be a good idea if you’re unsure.
You will need to consider what you can afford to be putting into your pension. You should evaluate your day to day living expenses and liabilities (mortgage, loans, etc.) these could all affect your ability to increase your regular contributions. If you can’t afford to make higher contributions now it isn’t the end of the world, it might just result in having to make higher contributions when you are more financially stable. You are currently unable to draw money from your pension until the age of 55, so you will need to ensure that any money invested is not integral.
Here are a few questions you should be asking yourself when trying to manage your retirement savings:
What do you already have in your pension?
Looking at what you already have in your pension is the best place to start. Doing so will allow you to see how quickly you are currently building your pension and how it might look in the future, from there you can start to make informed decisions and realistic expectations.
What kind of lifestyle are you looking to have during your retirement?
Your desired lifestyle will increase or decrease the amount of money you should have saved in your pension. If you are looking to spend £30,000 a year, you need to ensure you can afford to.
When are you looking to retire?
If you are considering taking early retirement then you will need more money in your pension to ensure you don’t outlive your funds.
With your state pension, there are benefits to retiring after your state retirement age. Choosing to defer retirement results in your income being increased.
What is your attitude to risk?
We all know the saying “high risk, high reward” but you need to consider what would you do if you lost all your pension savings? Could you afford to live? If the answer is no, then you should re-consider the amount of risk your taking with regards to your money.
Equally, more ambitious retirement plans may require more risk to be achievable.
If after crunching the numbers your goals seem unobtainable it might be worth considering managing your expectations and if all of this still seems confusing it might be worth seeking financial advice.
If you would like to talk to someone about your pension or receiving more information on how we could help you with your pension, please contact Sound Financial Management via telephone (01752 207070) or via email (firstname.lastname@example.org).