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It’s Time to Invest – What’s Your Retirement Number?

‘It’s Time to Invest – What’s Your Retirement Number?’ is taken from our new guide, Time to Invest, which explores the importance of retirement planning and the power investment can have in creating a comfortable ‘retirement pot’. Download it today

Deciding whether you’re ‘retirement ready’ is just one part of a much larger puzzle, but is the first step towards securing your financial freedom. One of the most important parts of your journey is establishing your retirement number – an estimate of how much you’ll need to retire without compromising your current lifestyle, based on your household income.

Reports have found that for a single pensioner to live a comfortable retirement in the UK, around £17,800 per year is needed. But with the average UK pension pot standing at £61,897, the disparities between the desirable and actual figures have increased the appeal of additional investments. While 41% of the working population remain reliant on their pension, cash and investment ISAs are the most common investment avenue for many.  21.3% of respondents have opted for this investment, whereas property was the second most popular asset, with 19.3% of respondents having embarked on their Buy-to-Let journey. 

With retirement in mind, the distribution of investment assets across all generations is most surprising. Generation Z, those who are furthest away from their retirement age, are most likely to invest, whereas only 60% of Baby Boomers are inclined to consider additional ways to grow their capital. While over half of those approaching the retirement age have intentions to invest, when it comes to maximising retirement finances, investing sooner rather than later is advised. 

The longer the period of time between investing and your retirement the better, to allow your investment asset time to generate substantial, natural growth. Not only does this increase the chances of sizable returns, but it also reduces the risk of your investment. Specifically, the impact of inflation rates can significantly affect the value of your capital over the years, with a rate of just 3% cutting a healthy figure by 50% over the course of 24 years. 

So, how can you maintain your current lifestyle throughout your retirement? It is a common assumption that to live by the same standards as your working life, you’ll need at least half to two-thirds of your current salary, after tax. 

Putting this into practice, if at 45 you’re accustomed to an annual household income of £60k and plan to indulge in 30 years of retirement, you’ll need: 

60k x 2/3 x 30 = £1,188,000 (£3,300pcm). 

For those at the start of their retirement journey, your number may be daunting, but with many investment avenues available, a pension pot is not the only route to achieving the retirement you deserve. From ISAs, to luxury goods and property investment, there are many ways to make your retirement number more attainable, but investing your savings into competitive markets is crucial. Our next piece will introduce your options and discuss investing for retirement.

Want to know more about retirement investing?

From establishing your retirement number, to exploring your investment options, start your journey to financial freedom with Time to Invest.

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