How much does a single person need to save for retirement?
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EltonJohnFan
Posts: 316 Forumite
Good evening all,
I'm looking for a general outline on how much a single man living in Scotland would realistically need to save for retirement. I live a very simple life, no debt and really have no outgoings other than expenses which are connected with my disabilities. My annual outgoings when in work are never more than £10,000 per year, if that, and from this money, I live a very comfortable existence. I'm hoping you can give me a figure that I should aim towards over the the next 45 to 50 years or so as I need a firm goal in my mind before I can begin. I'm still very young but I do know just how fast life passes us by and I want to be thoroughly prepared, for whatever happens. I generally earn a good wage when in employment and I'm able to save a fair amount of this each month without feeling that I have to spend it because I'm not, as I say, a big spender anyway. Would £125,000 be realistic, £250,000? how about £500,000? I'm open to all advice and hopefully you can help me, thank you very much.
I'm looking for a general outline on how much a single man living in Scotland would realistically need to save for retirement. I live a very simple life, no debt and really have no outgoings other than expenses which are connected with my disabilities. My annual outgoings when in work are never more than £10,000 per year, if that, and from this money, I live a very comfortable existence. I'm hoping you can give me a figure that I should aim towards over the the next 45 to 50 years or so as I need a firm goal in my mind before I can begin. I'm still very young but I do know just how fast life passes us by and I want to be thoroughly prepared, for whatever happens. I generally earn a good wage when in employment and I'm able to save a fair amount of this each month without feeling that I have to spend it because I'm not, as I say, a big spender anyway. Would £125,000 be realistic, £250,000? how about £500,000? I'm open to all advice and hopefully you can help me, thank you very much.
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Comments
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If your aim is to live on £10K per year, which does seem rather frugal to me ...
Very roughly...
State pension will give you around £5K assuming you pay your 30years NI. So you need another £5K. If you want it inflation linked, which ideally you do, a £5K annuity will cost you around £150K. So that is the starting point.
BUT we have inflation between now and when you retire. Lets assume inflation will average 3% for the next 45 years.
Total inflation factor is 1.03^45=3.78. Lets call that 4. So you will need £600K by the time you retire.
That sounds a lot, but of course your income should have increased by at least 4 times in the intervening years.0 -
If your aim is to live on £10K per year, which does seem rather frugal to me ...
Very roughly...
State pension will give you around £5K assuming you pay your 30years NI. So you need another £5K. If you want it inflation linked, which ideally you do, a £5K annuity will cost you around £150K. So that is the starting point.
BUT we have inflation between now and when you retire. Lets assume inflation will average 3% for the next 45 years.
Total inflation factor is 1.03^45=3.78. Lets call that 4. So you will need £600K by the time you retire.
That sounds a lot, but of course your income should have increased by at least 4 times in the intervening years.
Thank you.
I'm in my early to mid twenties and I have the seven years of National Insurance Contributions so far. I don't know where about in the country you are, but where I am? you can quite easily get by on £10,000 a year and still have change left over. I understand that I'm quite lucky to be able to do this but I live in a very inexpensive area of Scotland and so, that means I can probably save a little bit more than someone, who for example, lives in a city. Would I still be entitled to a full State Pension if I manage to amass say £250,000 for example? I read that you're only allowed to have £16,000 in savings when you're claiming benefits etc. I think the £600,000 you quoted is a little steep knowing my own situation but still, it's good to have something to aim for
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An extra calculation:
Assuming 3% inflation and 6% return on your investments..
If you put £1800 adjusted each year for inflation into your pension you would reach £600K after 45 years. I hope that doesnt sound so bad.0 -
EltonJohnFan wrote: »Thank you.
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Would I still be entitled to a full State Pension if I manage to amass say £250,000 for example? I read that you're only allowed to have £16,000 in savings when you're claiming benefits etc.
State pension isnt a "benefit". It's a right for which you pay part of your NI. So, no, there is no means testing.0 -
Who knows what the state of the penson will be by the time you retire, would that we all had a crystal ball, my advice is save in a pension and save in ISAs etc but don't leave yourself with no money to enjoy life because without that crystal ball you don't know how long a retirement if any you are going to get.0
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nearlyrich wrote: »Who knows what the state of the penson will be by the time you retire, would that we all had a crystal ball, my advice is save in a pension and save in ISAs etc but don't leave yourself with no money to enjoy life because without that crystal ball you don't know how long a retirement if any you are going to get.
Who knows what will happen in 45 years. The best one can do is to make reasonable assumptions based on what we know now and act on the implications.
If circumstances change then the assumptions and thus the implications will need to change.
But, it is clear that if one wants a retirement free from financial stress significant long term saving and investing is essential.
Although the total sums involved look enormous, the joys of compound interest do mean that saving the required amounts is perfectly feasible if one starts early. In the OPs case, saving 15% annual expenditure (allowing for basic rate tax) does not seem unreasonable.0 -
As a couple (in Scotland) with our own house, mortgage free, we find that £15k is adequate to live to a good standard. We run a car, keep cosy, and pay our huge Council Tax bill Taking holidays needs a bit more, and then we save whatever is left over.0
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If you know what you want, use a pension calculator
e.g.
http://www.h-l.co.uk/pensions/interactive-calculators/pension-calculator0 -
Who knows what will happen in 45 years. The best one can do is to make reasonable assumptions based on what we know now and act on the implications.
If circumstances change then the assumptions and thus the implications will need to change.
But, it is clear that if one wants a retirement free from financial stress significant long term saving and investing is essential.
Although the total sums involved look enormous, the joys of compound interest do mean that saving the required amounts is perfectly feasible if one starts early. In the OPs case, saving 15% annual expenditure (allowing for basic rate tax) does not seem unreasonable.
Sounds like my theory too I realised when I was 28 that I didn't want to work forever so I have been saving in my pension plans and Isas ( and their predecessors) I keep tweaking it and I hope I have enought to survive till I am at least 106;)
I am aiming for retirement at 55 when the goverment think I should work till at least 66 now....it was only 60 when I started!0
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