By starting early and saving regular sums, you could DOUBLE the amount you will get from the new State Pension. That will make for your final years much more rewarding.
To save enough for retirement, it helps to start early as your money has more time to compound and grow.
If somebody started saving £3 a day at age 25, around £90 a month, they would put away £1,068 a year. If that money grew at an average annual rate of six percent a year, it would be worth £175,200 by age 65.
That would generate income of £9,625 a year if used to buy an annuity, the same as the maximum new State Pension pays today.
That would lift your total retirement income to £19,252 a year.
Last year, the Pensions and Lifetime Savings Association calculated that a single pensioner needs a retirement income £10,900 a year for a basic living standard in retirement.
Investing just £3 a day at an early age should help people easily beat that.
Ideally, everyone should invest much more, because that £175,000 will be worth less in real terms as time goes by, due to inflation.
Laith Khalaf, head of investment analysis at AJ Bell, says the golden rule of retirement savings to put away as much as you can, as early as you can. “Just delaying a few years can cost you dear.”
Somebody who doesn’t start saving for retirement until they are 35 will need to put away £5.75 a day to get £175,000 mark by age 65, rather than £3 a day.
That’s because their money only has 30 years to compound and grow in value.
Khalaf says: “The best way to build retirement wealth is slowly but surely.”
If you do not start saving until you are age 45, you will have to put away £12.35 a day to play catch up.
That is the equivalent of £375 a month, or £4,500 a year. It will prove a tall order as the cost of living crisis intensifies.
The number of people saving for retirement is now FALLING as all our wallets are squeezed by rising prices.
More than four in 10 household said they will not be able to save ANY money this year, according to research from investing platform Bestinvest.
The site’s analyst, Adrian Lowery, said the survey was taken before the energy cap increased on April 1, and people have even less money to save now. “Do your best, as investing something it’s always better than investing nothing.”
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Lowery said the good news is that eight out of 10 workers now get a company pension, via the auto-enrolment scheme.
But he warned against sitting on your laurels and assuming that will be enough. “If your employer offers matching contributions, you should pay more into your pension to take advantage of this generous uplift.”
Workers could further boost their retirement savings by investing inside via their £20,000 annual tax-free Stocks and Shares ISA allowance.
Everybody needs a cash safety net with money on easy access, but long-term savings will generate a better return from the stock market, says Becky O’Connor, head of pensions and savings at Interactive Investor.
“Shares are volatile in the short run but should provide a far superior return over periods of five or 10 years. The longer you invest for, the more shares outperform.”
Investing just £3 a day at an early age can eventually roll up into hundreds of thousands of pounds.