Think you’re saving enough For your retirement? Likely not, based on a commonly cited pension guideline mentioned by Martin Lewis .
In the most recent issue of his newsletter, the founding figure of Money Savings Expert (MSE) directed attention towards pensions , featuring assistance on navigating everything from locating missing items savings to maximising your investment .
Amidst all this guidance, he also explored how much we ought to set aside for our retirement years — and the findings are quite alarming.
"Take a deep breath," encouraged Martin, prior to sharing a 'frightening' guideline for determining your path to an adequate destination. pension savings pot.
He clarified: "Consider the age at which you begin contributing to your pension, divide it by two, and that figure represents the percentage of your gross income you should strive to allocate towards your pension." throughout the remainder of your career for a robust retirement income.
'So begin with 20, which accounts for 10% (including the employer's contribution). At 40, it becomes 20%.'
If we break that down, it indicates that someone who is 40 years old would be on the mean British income relative to their age ($71,650 AUD) is expected to contribute $14,330 AUD towards their pension this year. In contrast, someone aged 20 with an average salary of $40,440 AUD should put aside $4,044 AUD.
Keep in mind, precise figures may rise or fall according to your earnings, and your individual contribution can vary based on what your employer contributes.
Nevertheless, the workout provides a valuable – though blunt – understanding of what happens when you choose to ignore reality.
Don't fret, scarcely anyone reaches that stage," Martin said. "The key point is that starting early is preferable since it gives you more time for your returns to accumulate.
The MSE website Highlights that 'many individuals cannot initially contribute sufficient amounts according to the "half your age" guideline,' hence you should 'begin with what you're capable of.'
It's recommended to allocate a fixed percentage (instead of a specific dollar amount) every month, ensuring you stay updated as your income increases.
Martin also shared another piece of advice specifically for those reading his newsletter: “Each time you receive a salary increment, try to allocate a portion of it towards your pension fund before you adjust to the extra income.”
Lifestyle inflation (also referred to as lifestyle inflation It's actually a genuine concept, so jumping in front of it can be a clever method to outsmart yourself into becoming more accountable.
Spending in the here and now is often necessary, but just think how happy ‘future you’ will be if you look out for them too.
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