How Much Should I Have Saved?

If you're anything like me, you have probably questioned from time to time "Am I saving enough?" or "How much should I be saving exactly?". Sometimes we just need reassurance that we are doing ok, or a kick up the behind to get ourselves into gear. 

So as I had asked myself these types of question multiple times, I decided to go on a search for some answers! And what I found is that there is not one straight-forward answer - surprise, surprise! 

Of course, how much we one needs for retirement will vary a lot depending on personal circumstances, but in this blog I provide three different recommendations which you could use to guide you on your saving endeavours. These saving recommendations are specific to what you should be saving for retirement, but of course it goes without saying that emergency funds (3-6 months worth of expenses) are important to top-up too.

Savings Theory 1: Fidelity
By age 30 = Aim to save at least 1x your salary 
By age 40 = Aim to save at least 3x your salary 
By age 50 = Aim to save at least 6x your salary 
By age 60 = Aim to save at least 8x your salary 
By age 67 = Aim to save at least 10x your salary 

So if we look at these recommendations according to the average UK salaries by age, what would this look like?

• Average of £23,670 per year for people aged 22-29 means people should have about £24,000 saved for retirement by age 30
• Average of £30,096 per year for people aged 30-39 means people should have about £90,288 saved for retirement by age 40
• Average of £32,544 per year for people aged 40-49 means people should have about £195,265 saved for retirement by age 50
• Average of £29,904 per year for people aged 50-59 means people should have about £239,232 saved for retirement by age 60

 
Savings Theory 2: Two-thirds of income before retiring
Some experts suggest that a good estimate of how much you need for retirement is between half and two-thirds of your income before retiring. According to a Which? study that was conducted in the UK in 2021 amongst retirees, a couple would need an annual income of £18,000 per year to have the essentials covered, £26,000 for a couple to have a comfortable retirement, and £41,000 for a couple to have a luxurious retirement.

Assuming that a person does not retire until their state pension kicks in, so late 60s, a person would approximately need the following:

• For an Annual Salary of £26,000: A total pot of £154,700 saved if you plan on having a drawdown pension OR a total pot of £265,420 if you plan on buying an annuity
• For an Annual Salary of £41,000: A total pot of £442,020 saved if you plan on having a drawdown pension OR a total pot of £757,000 if you plan on buying an annuity

 
Savings Theory 3: Moneyfarm
According to Moneyfarm, a person wanting to achieve a retirement income of £19,000 per year needs to save £7,300 per year. However, this will be dependent on the age you start saving (the later you start, the more you need to save).

Moneyfarm also state how much should be saved by age:
Age 30 = £51,434 saved
Age 40 = £124,911
Age 50 = £198,390