Pension help

[orlagivememore]

I've got just £12k in a pension pot and £5k in another but I'm 42. How much should I be putting away each month to live comfortably off in retirement? I'm self employed and earn about £1.5-£2k a month.

‘Take the age you start your pension and halve it. Then put this % of your pre-tax salary into your pension each year until you retire.’ So says Money Saving Expert: www.moneysavingexpert.com/savings/discount-pensions/

Sounds like a lot, but you’ll be living off it for potentially 3 decades.

So based on £2k a month then put £420 away a month??

Yes. You’ll get it back again one day, plus growth

Thank you 🙏 I just need to bite the bullet and put the money away now! What would it be worth to me at retirement age?

That depends on so many things I couldn’t possibly say. But it should grow faster than inflation, so more than it’s worth now. Plus if you spent it now you’d have to pay tax on it first, whereas if you put it into your pension you don’t.

Most of all it buys you peace of mind that one day you’ll be able to retire and you won’t be impoverished.

The advice I was given was a third away for pension.

Well where ever you put it first check the charges/management fees, they are generally high.
Ive recently moved a lot of my money into a Vanguard pension account, look them up, it‘S all clear and they keep charges down

The way to work out what you will need is to do a budget planner for what you spend money on now and then cross off what you won’t have in retirement. You will then need to add on what you may want to have in retirement.

I find this exercise and my monthly outgoings of £2000 went down to around £1400 so I worked on that.

My state pension will give me £760 of that a month so I will have a shortfall of £640 per month.

In simple terms, I then reckoned on living for 20 years in retirement (Taking me to 87)

So I needed 20 x £7680 so £153600.

I didn’t factor growth in as figured that would cover inflation and if I live a bit longer.

I therefore needed to save that and I had 25 years to do it. Again, I stripped growth out and worked out I would need to save £6194 per year gross but to me after tax relief £4915 or £409 per month.

@KLF6 - Don't forget tax on your pension in payment, obviouslt you will have your personal allowance, but above that taxed at 20%.

So your number, may need to be a bit higher.