Pension - Rule of Thumb

Cotta

Hi,

I know this is fairly subjective but I remember on here someone mentioned a rule of thumb that when reaching certain ages your pension should be at least a certain amount.

Does anyone know what this rule of thumb is?

Thanks in advance.

xylophone

http://citywire.co.uk/money/are-you-paying-half-your-age-into-your-pension/a751045

He added that as a general rule of thumb an individual should be saving half of their age as a percentage of income. So for instance a 40-year-old should be saving 20% of their salary into a pension, and a 20-year-old should save 10%.

Cotta

That's the one, thank you.

Eric_the_half_a_bee

Does that rule of thumb make any sense though? It's not obvious to me that it does.

Reue

My understanding was that its half your age as a % from the age at which you first started saving. For instance a 20yr old starts at 10% and continues at this level. A 30yr old starts at 15% and continues etc.

jackieblack

Reue wrote: »

My understanding was that its half your age as a % from the age at which you first started saving. For instance a 20yr old starts at 10% and continues at this level. A 30yr old starts at 15% and continues etc.

This is also my understanding

dunstonh

One target figure that was bandied about as a guide was the aim to have £35k in your pension fund by age 35. That was seen as an on track figure to give an idea of ballpark.

Like most of these quick and dirty guides, they are not accurate enough for most to rely on but they do get you thinking of the ballpark area you should be at.

AnotherJoe

Reue wrote: »

My understanding was that its half your age as a % from the age at which you first started saving. For instance a 20yr old starts at 10% and continues at this level. A 30yr old starts at 15% and continues etc.

Exactly. As stated earlier you'd keep raising it each year which would be overkill. The idea is, since it keeps constant from when you started, the earlier you start the better.

Its of course a rule of thumb which means its just a rough guide and putting more in is not a bad thing, as that will mean you have more to retire on / can retire earlier.

TrustyOven

http://www.financialsamurai.com/the-average-net-worth-for-the-above-average-married-couple/

That blog post is USA specific but may help give you ideas for net worth targets by age. Might be of limited use though.

jamesd

Rules of thumb are OK but do you have any thoughts about when you'd like to retire and on what fixed and what nice to have income levels? It can be much easier to pay in a lot when you can see that it's helping you to achieve some specific goal and that also helps with deciding how much to pay in.

stoozie1

Eric_the_half_a_bee wrote: »

Does that rule of thumb make any sense though? It's not obvious to me that it does.

nor me!

For example, does the total % include employer's contributions, is it net or gross, of total salary, or of salary minus pension contributions.

I know it's only a rule of thumb, hence the thread title, but since the answers for me could lead to 3 times the contributions vs the other way of reading the rule, I'm afraid I can't follow it.