How much do I need in my pension?

There’s always a lot of noise regarding pensions. Questions abound about how a pension should be invested along with questions on which financial company should handle a pension, and questions on the tax benefits of pension savings. These concerns inspire countless think pieces and take up thousands of column inches. As valid as these queries are, they are all secondary to the most important question of all. A question that perhaps doesn’t get explored as often as it should.

 Simply put, how much do you need in your pension fund? The question of how much you need in the pot is easy to ask but the answer isn’t easy to give. Individuals will have different financial requirements and these needs will need to be reflected in their pension. Today, we will discuss how much a person should save for their pension and how long their pension is expected to last.

How much have you saved for your pension?

Not sure where to start with your pension. The natural starting point is checking how much your pension has grown. We advise taking some time to check on your pensions. Although you may have only saved a small amount from a job years ago, this pension may have grown substantially in the intervening years. So absolutely check them all. If you have pensions from various jobs or careers, you should consider consolidating them into one easy to manage pension fund.

How much do you need in retirement to sustain your quality of life?

It’s time for an honest conversation with yourself. How much do you think you’re going to need in retirement? People tend to underestimate their financial requirements. Although costs like mortgage repayments and child care expenses will likely be gone by the time you retire this doesn’t mean you’ll be happy living on a reduced monthly income. For example, if you were earning €75,000 a year would you be able to adjust to an annual retirement income of €25,000?
Planning for a radically cut income in retirement just isn’t practical. We highly recommend planning for at least 60% of your pre-retirement income.

How much can be added to a pension?

We’ll keep it simple. It’s never a bad move to save more. The more money you put into your pension the more disposable income you’ll be able to enjoy in retirement. The amount you can put into your pension should be dictated by how much you can afford and what tax-driven maximums apply to you.

How Long Should Your Pension Last?

Time makes a difference regarding your pension. The sooner you begin retirement planning the sooner you can benefit from the tax benefits a pension can offer. Also, the later you leave retiring the longer your money stays invested, allowing it to continue to grow and mature. Most people underestimate how long they’ll spend in retirement, so always plan – and hope – for a long retirement.

For additional information on retirement planning, we recommend visiting our dedicated retirement planning page.