The ultimate goal is to save up enough to one day stop working – but how much anyone needs for that depends on too many factors to predict.
A good rule of thumb is that you might need about 2/3 of what you earned while working to be comfortable - that’ll be our starting point.
These calculations assume your money grows at 5% each year after deducting all fees, an inflation rate of 2.5% each year, and that you increase your payments each year by 2.5%. All numbers are shown in today’s money, and your retirement income is based on 4% of your retirement pot including state pension at current levels.
To make things simple, all the numbers we show you are in “today’s money”. This means they are based on what money is worth & what things cost today.
So, when thinking about how much you might need to live when you retire, just think about how much bills, shopping, holidays, school fees, socialising, all cost today.
In real life, things get more expensive every year as you get older (by about 2-3% per year), but there’s a simple trick. Each new year, increase your monthly payment by that same small amount and you’ll stay on track. Don’t worry though, we’ll tell you exactly how much when the time comes.
The very best thing to do is every you time you start earning more money, add a bit of that extra into your pension payment. Again, we’ll help you decide how much on your Penfold Anniversary!