How much should I budget for a pension?
Informed Choice managing director and chartered financial planner Martin Bamford answered a question from a reader for thisismoney.co.uk, about how much they should budget for their pension.
Everywhere I look, they’re saying I should put money into a pension. But I’m struggling to get started.
At the moment I’m not saving anything, let alone for a pension. How do you recommend that I work out how much to save for retirement? K.S, South London
Martin Bamford, independent financial adviser at Informed Choice, replies: Good budgeting is all about planning ahead and having the discipline to stick with it over time.
It can be very simple, and most people who succeed with a budget do it with little more than a spreadsheet listing their expenditure.
If you line this up with the frequency of your earnings, whether these are weekly or monthly, then it is a case of matching your net income and planned spending.
A common mistake we see with budgets is plans to spend every last penny of income each month. This leaves no room for unexpected expenditure or small financial emergencies, which are bound to occur frequently.
Sometimes budgeting can be a painful experience, particularly when you discover you have been living outside of your means. It is a good opportunity to take action and cut back on unnecessary spending.
The amount you budget to save for your retirement will depend on a variety of factors, including how high you rank retirement planning in your list of financial priorities.
Run a budget for a few months to make sure you can stick with it before committing to a regular monthly amount for your retirement. It is sometimes good to have a practice run, saving the money into a savings account rather than a pension, to make sure it is affordable.
You can read the article in full here.