Determining how much you need to retire depends on your current age, desired retirement age, lifestyle, expenses, and retirement goals. However, here is a general guideline you can follow:
Determine your retirement goal:
It would help if you determined the lifestyle you want to maintain in retirement. Do you plan to travel or downsize your home? Will you need to pay for healthcare or other expenses? Once you have a goal, you can estimate how much you will need to fund that lifestyle.
Calculate your retirement expenses:
It would help if you estimated how much you would spend in retirement. You can start by looking at your current expenses and adjusting them for inflation. Consider costs such as housing, food, transportation, healthcare, and leisure activities.
Estimate your retirement income:
Your retirement income will come from several sources, such as State pension, workplace pension accounts, personal plans, and any other investments you may have. You can estimate your retirement income based on your current savings, expected investment returns, and other factors.
Determine how much you need to save:
Once you have estimated your retirement expenses and income, you can determine how much you need to save. You can use retirement calculators to help you estimate how much you need to save based on your current income, age, and other factors. As a rule of thumb, experts recommend saving at least 10-15% of your income for retirement. Based on your current income of 25k, you should save at least £2,500 to £3,750 per year for retirement. However, remember that tax relief will assist you in meeting this figure and that this is just a general guideline; your retirement needs may vary based on your circumstances. We provide lifetime planning to assist clients with when they can retire or how we can assist them on their retirement journey.
In addition to the steps outlined above, asset allocation strategies can also assist in planning for retirement. These strategies can help maximise returns while minimising risk based on your risk tolerance, investment objectives, and time horizon.
One such strategy is diversification, which involves spreading your investments across various asset classes, such as stocks, bonds, real estate, and alternative investments, to reduce your exposure to any market. Another strategy is rebalancing, which involves adjusting your portfolio periodically to maintain your desired asset allocation mix.
Using a financial planner can help you create a customised retirement plan incorporating asset allocation strategies based on your circumstances and goals. A financial planner can also provide ongoing support and advice as you navigate the retirement planning process and adjust your plan as needed over time.
