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?
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:
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
29-year old living in the UK who is actively working towards achieving Financial Independence (FI). Sharing all the tips and tricks I am learning along the way!