Two of the main reasons that young people give for not saving for their retirement are that it is too far in the future for them to worry about and that they don’t have any spare cash to save. But, by starting young, you drastically reduce the amount you need to save.
Legal & General, a financial services provider, share the table above on their website which illustrates the monthly amount that needs to be saved to achieve a pension income of £5,000 a year depending on how old you are:
The table illustrates the cost of delay. The longer you put off saving for retirement, the more expensive it gets.
The counter-argument to ‘I don’t have any spare cash now’ is ‘When will you have?’. If you don’t think you can afford to save for a pension when you’re earning, how will you afford to live once you retire and have no earnings? The State pension may well be around, but some people feel that it may not be, and if it is, it may not be as generous as it is today (about £9,110 a year if you’re entitled to the full amount). A recent study showed that the average retired household spend was just under £22,000 a year (bbc.co.uk), so you can probably imagine just how difficult it would be to live a comfortable lifestyle on just the State pension.
The best time to start saving for your retirement is as soon as you’re in full time employment. If you’re eligible for a workplace pension, both your employer and the government will add money to your pension pot. If you work for yourself or if you don’t qualify for a workplace pension, you can save into a personal pension. The government will add money into your pension pot. Many personal pensions have a minimum contribution of £20 a month, making them affordable for most people.
Source - A Young Person’s Guide to Money -
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