A new study claims that an individual in the UK who wants to retire at the age of 68 will need to have saved seven times their annual household income in order to maintain a comfortable lifestyle.
To achieve this, workers should have saved 13 per cent of their income every year from the age of 25. This would give them a pension pot of the same size as their annual household income by the age of 30. This should double by the age of 40, quadruple by the age of 50 and be six times larger by the age of 60, reaching the magic seven times annual income by the age of 68.
Interestingly, the study found that Britons need to save less than workers in other countries. According to the research, savers in the US needed to save 15 per cent of their household income from the age of 25 to reach their retirement goals. Meanwhile for Canadians and Japanese it must be 16 per cent, for residents of Hong Kong 20 per cent and for Germans, a whopping 21 per cent.
The study also found that while Britons and Japanese need to have accumulated seven times their household income by the time they retire, Americans, Germans and Canadians will need 10 times the amount and residents of Hong Kong will need 12 times.
It is hoped that younger people will follow the formula when they are planning for their retirement. However, a recent study by the Financial Conduct Authority found that 15.1 million people in the UK are facing a ‘retirement timebomb’, as they are not saving anything at all.
To find out more about how Kirk Newsholme Financial Planning can help, please contact Richard Leonard at Richard.Leonard@knfp.co.uk or by calling 0113 204 4215.