How much should I be saving per month for retirement?

Rob O’Neill QFA, Senior Financial Advisor

Most of us dream of a stress-free retirement, spending our time with loved ones and doing the things we enjoy the most, however, a recent Standard Life survey of 1,000 respondents has discovered that the average Irish adult would like to retire on €40,000 a year, but is only saving towards an annual retirement income of €6,000.

The survey shows a substantial disconnect between what Irish consumers believe is enough to save for retirement and the reality of how much we need to put by each month to maintain our standard of living. Nobody wants to be stressed about finances at any point of their lives, but it is particularly difficult for those who have worked all their lives to find that their nest egg is not enough to live on.

That’s why we believe at MC Financial, that it is never too early to start a pension, the earlier you start the less you will need to spend to get the retirement you deserve. The Standard Life survey found that 3 in 4 adults need a retirement income of between €25,000 and €50,000 to live comfortably.

So how do the numbers stack up?

*If you want to retire on €40,000 per year, you must work back to see how much you need to save. Let us assume that you are an average saver (with an expected retirement income of €6,000 per year), you will be entitled to s full state pension of €12,000 per annum and you will need to save for a retirement income of €22,000 per i.e. €40,000 minus €12,000 minus €6,000 equals €22,000 per year or a fund of €440,000 (22,000 divided by 5%** annuity rate).

How much do you need to save per month to give €440k at age 65 or €22,000 p.a**

 

Age Monthly Premium Gross
30 €400
35 €543
40 €754

 

When we consider the difference of premiums from age 30 to age 40, it is clear that getting started young is the key to saving for an affordable and realistic retirement.

Our advice is to not to put your pension on the long finger, get independent advice from a broker today and start saving for your pension before it becomes an expensive luxury.

To find out more starting a pension, talk to Rob, our pensions expert today by calling 01 822 8022 or by emailing rob@mcfinancial.ie or check out the MC Financial comprehensive pension page.

 

 

*Example has been supplied by Standard Life and is used as an illustration only. Figures are correct as of 25th October 2014.

** Assume 1% annual management charge and 6% investment growth p.a. Based on an annuity rate of 5% for a 65 year old male.

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