‘How much do I need to retire?’ Is something we hear often. Here are two ways to work out how much you need to have saved and whether you’re on track


The milestone rule


We’ll assume you want to retire at 65 and have a nest egg to live and maintain a similar standard of living for the 20 or 30 years after you stop working.

The milestone rule is to have saved a multiple of your salary at certain ages.  This table is a rough guide of how much you should have saved by certain age milestones.

For example, by age 35, you should have twice your annual salary saved. By age 40, you should have three times your annual salary saved. By age 65, you should have eight times your annual salary saved.



Don’t panic if you haven’t saved anywhere near these figures. You’re certainly not alone. In fact most people haven’t, but hopefully this could provide a little nudge when you still have time to get back on track.

If you earn thirty-five thousand a year then you should aim to have savings of two hundred and eighty thousand by the age of 65 to maintain your lifestyle.

If you earn fifty thousand a year, then you should target a pension pot of four hundred thousand. 


The 25 rule


The 25 rule is an alternative to the milestone rule.  Work out how much you will spend, or plan to spend, every year in retirement, and multiply that by 25.

For example, if you spend twenty thousand a year, you’ll need twenty thousand times 25. Five hundred thousand.

Projecting annual expenditure can be tricky to calculate. Some big expenses, such as mortgage, pension saving, and children will disappear, but may be replaced with new expenses such as holidays, travel, and grandchildren.

Start with your monthly bills, food, council tax and leisure. If it still looks like a horrifyingly big number, you’ll either to either have to trim your spending, or get saving right now. 


Don’t stop now, start!


A pound saved today, will make a huge difference in 20 years’ time so don’t stop or lose hope, start saving more.

Hopefully, you’ll also receive a state pension, although it’s likely to be smaller than the current one hundred and seventy five pounds per week.

To get your pension savings on track: 


  • Pay as much as you can afford into your workplace pension as your employer will match your contributions, really boosting your annual savings.
  • Aim for at least 15% of gross income. Remember, you get tax relief on your contributions.
  • Review your investments annually. Remember, risk is a long-term friend. Being too cautious with your investments can be bad for your wealth!


Leave a Reply