Regardless of how young you are at the moment, you might have taken a moment or two from your crazy routine and breathed a sigh of relief, envisioning the rosy, golden years of your retirement. The frustration you deal with and the extra effort you put in now will make the peace and comfort you enjoy in those lovely golden years worth it.
On the other hand, how do you know you’re making enough to actually be able to enjoy those years? How much money does one need to actually retire? If you’re pondering the answers to those, we’ve got the answers for you.
When Did You Start Saving?R
The age you start saving at has a huge impact on the total amount you need for retirement. Ideally, you should start saving in your early twenties. The amount you’ll end up with will be significantly different than when you start saving in your thirties or your forties.
If you invest an annual amount of £1,950 which draws a 7% return on investment (ROI) in your twenties, the total amount you have by the time you’re 65 years old will get a total of £223,809.
Now let’s calculate this annual amount with the same ROI, if you were to start investing in your thirties or forties, you will get a total of £169,788. The earlier you start, the more time you have to contribute towards the growth of your nest egg.
What Age Do You Want to Retire At?
This factor plays a huge role in determining how much money you’ll end up making. For most people, the goal is to retire by the age of 65. For this purpose, they will have to start saving money as soon as possible.
Some people might say you will need to have a six figure bank account so that should be your main aim. However, 65 is just the average age and there are plenty of people who actually work past that age so there’s no pressure to stick to it.
Moreover, if you have a healthy retirement plan and great saving habits, you’ll be able to continue adding to your nest egg so that by the time you retire, you might even end up having a larger nest egg than usual.
What Kind of Lifestyle Will You Have After Retirement?
Once you’re retired, how do you expect to live? Do you plan on leaving a nice, minimalistic, relaxed life or do you intend to travel the world or simply upgrade your home so you can spend your years living in a luxuriously, cosy house?
The kind of lifestyle you plan on leading will make an impact on the amount you need for retirement. Obviously if you’re looking to travel the world or upgrade your home, your account will feel the full brunt of this expenditure.
Just keep in mind that you won’t exactly be able to replenish the amount as easily as you used to. Pension plans are great but if you’re spending more than what is coming in, you might end up running out of funds sooner than you expected.
While these factors aren’t fool-proof, these will help you gauge a rough estimate of the amount you need to retire.