Perhaps it is the fact that my eldest daughhter turns 18 this week (enough to make me feel considerably middle-aged!) but there are some fairly alarming reports doing the rounds about how badly people are planning for their retirement.

Sun Life Financial of Canada conducted a recent survey amongst people aged 60 and regarded as affluent. Only 26% of them felt that they had planned for their retirement in detail. 76% agreed that retirement planning has become more complex even within their own lifestime, with 84% agreeing the issues are more complex than when their parent’s generations retired.

The survey revealed that also half, 48% had little idea about the size of the pension pot that they would need. So in an attempt to provide a “rule of thumb” try this approach.

Take the income you want (before tax) and divide this by 4.5%. This will provide the approximate value of the pension fund you will need IN TODAYS MONEY. Importantly good planning will allow for inflation.

Here’s a worked example. Suppose you are 45 years old and require an income of £60,000 for your retirement before tax. The fund value needs to be £1.3m in todays money. If you plan to retire at 60 then there are 15 years left. If you estimate the rate of inflation to be 3% a year then that’s 15 years of inflation at 3.0% a year.

So the income of £60,000 has become £93,478 and the fund value £2,077,288. The numbers are pretty shocking aren’t they! That’s the power of inflation…. which is something that we all know, but tend to forget…remember that house you bought, the loaf of bread or the last time you bought pretty much anything a reasonable time ago..

We can help work out what you need and how to best get there, using the most suitable solutions given your requirements and attitude towards risk. Give me a call.
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