How Much Should You Be Saving for Retirement?
There's no shortage of adverts telling you how much you need for retirement—£250,000, £500,000, or even more. But the reality is that your retirement savings goal depends on several personal factors, including your income needs, age, lifestyle goals, and aspirations.
Financial planning is about more than just an annual review. It’s a lifelong process that takes you from building assets for retirement to managing your income in the most tax-efficient way possible.
Why Retirement Savings Matter
From April 2025, the New State Pension will be £11,973 per year—approximately £1,000 per month, assuming no tax is payable.
To put that into perspective:
The average cost of essential bills (council tax, gas, electricity, water, and home insurance) is £400 per month (Zoopla).
Broadband and a TV licence add another £40 per month.
A single person’s average food bill is £135 per month (NimbleFins).
That leaves around £400 per month for everything else. While the state pension rises with inflation, it provides only the essentials, leaving little room for discretionary spending or unexpected costs.
The Cost of Delaying Pension Savings
A study by MyNestEgg highlights the impact of delaying pension contributions. It estimates that you need to start saving early to build a £1 million pension fund by age 65—assuming 20% tax relief and an 8% annual growth rate (before fees and inflation).
The key takeaway? The sooner you start, the less you need to contribute each month. Delaying your savings by 10 or 20 years can dramatically increase the amount you need to set aside.
Factors That Determine Your Retirement Savings Goal
One of the biggest challenges in retirement planning is determining how much you need. Advertisements and surveys suggest a ‘healthy’ pension pot, but financial planning is more than just numbers—it’s about understanding you.
At Ifamax, we’ve spent over twenty years refining our financial planning approach. We take the time to understand your goals, circumstances, and vision for retirement. We then assess your existing investments and how they align with those goals.
Key factors that influence your savings plan include:
Your current age and expected retirement age
Your desired lifestyle in retirement
Your family circumstances and financial commitments
Your existing pension and investments
Considering these elements, we can help you define a realistic and achievable savings goal.
How Much Should You Be Saving for Retirement?
How much should you save?
According to the Living Wage Foundation, individuals should aim to contribute at least 12% of their income to their pension. However, Living Pensions Research suggests that 16.1% of earnings may be necessary for a secure retirement.
Some general benchmarks for retirement savings include:
Saving 10-15% of your income throughout your working life.
The 4% rule suggests withdrawing 4% of your annual retirement savings to sustain your income.
Short-term vs. long-term savings strategies, ensuring a balance between immediate financial needs and future retirement goals.
A common issue is that many people don’t save enough for retirement. Young professionals may prioritise buying a home or career breaks over pension savings, leading to gaps that require higher contributions later. Understanding these factors can help you make more informed decisions.
Best Practices for Growing Your Retirement Fund
Employer Pension Schemes & Contributions
Employer pension schemes are a great starting point for those who are employed. Employers must legally contribute at least 3% to your pension, but many offer higher contributions or matching schemes. Taking full advantage of this is essential—it’s essentially free money towards your retirement.
Investment Strategies for Long-Term Growth
A key part of financial planning is understanding your risk tolerance.
Risk vs. Volatility: Risk refers to permanent capital loss, while volatility refers to short-term price fluctuations. Historically, the longer money is invested, the lower the likelihood of loss.
Diversification: Avoid putting all your money in one sector or market. Spreading investments across different asset classes reduces risk and increases long-term stability.
Adjusting Savings Based on Life Changes
Life isn’t predictable, and financial planning isn’t just about annual reviews. Major life events—such as changing careers, having children, or receiving an inheritance—can all impact your retirement plans. A good financial plan should be flexible and adapt to these changes.
Speak with Ifamax Wealth Management About Retirement
There’s no one-size-fits-all answer to how much you need for retirement. While studies and guidelines provide estimates, your financial future is unique.
Ifamax Wealth Management specialises in helping business owners, families, and individuals build personalised retirement plans. Contact us today to start planning for a secure and comfortable future.
Risk warning
This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.