Building your pension pot is one of the most important things to do when planning for your retirement. But this begs the question – how much do you need?
The answer differs for every investor since your unique financial situation will have certain requirements.
But what should you be considering when determining how much you need for a comfortable retirement to help you reach your future goals?
How close are you to retirement?
One of the first things to consider is how close you are to retirement. The earliest most people can access their personal pension, as of the 2023/2024 tax year, is 55.
Therefore, it’s good to know when you’d like to retire so you can plan how much wealth you’ll be able to build in the length of time you have.
It’s good to access advanced wealth tracking tools with an online wealth management service, so you can plan your future investments according to how long you’ve got until retirement.
What are your retirement goals?
Another key area to establish is your specific retirement goals. This can give you a clear indication of the expected costs during your retirement and therefore how much you’ll likely need.
Are you looking to live a lifestyle that involves regular meals out, driving new cars, taking several holidays a year, or taking care of dependents, etc?
Understanding what you classify as a ‘comfortable’ retirement can help you more accurately predict costs.
We recommend speaking to a financial adviser who can help you set realistic goals that are achievable in terms of your financial situation.
How are you investing?
This is key when planning for retirement, as how you invest can significantly impact your potential to grow your pension pot.
For example, if you’re contributing a small amount to your pension each year, then you’re likely only utilising a portion of your tax wrapper’s capabilities.
Consider how making the most of your £60,000 pension allowance each year can help you build a larger amount in your pension pot for when you retire – making certain aspects of your retirement goals more achievable.
Do you have wealth resilience?
Whilst it’s important to have an idea of how much you need in your pension pot, it’s also essential to build wealth resilience.
As your situation evolves, various aspects could impact your savings, so you need to have resilience and flexibility with your wealth.
We recommend having a wealth manager review your plan constantly. Therefore, if your situation changes, they can re-assess a new figure for how much you’ll need in your pension pot to fund your future plans.
By considering these simple questions, you can more accurately assess your financial situation to determine how much you need in your pension pot for a comfortable retirement – whatever this might look like for you.
Please note, the value of your investments can go down as well as up.