22 May 2022

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How much to set aside for retirement

Author: Luigi Campopiano

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Saving for retirement can be difficult, especially since your savings goals depend on several factors: current age, age at which you plan to retire, how much you expect to spend each year in retirement, etc. New research from JPMorgan reveals how much workers should have set aside in a hypothetical pension fund depending on their income and age. It does so using a graph (expressed in dollars: it is a simulation and should be taken with a grain of salt. Each case is different and in its own right, and research assumes that you are currently saving 5% of your annual income and will continue at this rate until retirement. The calculations also assume that you will live about 30 years in retirement, which you will spend roughly the same amount as now and that you will retire at 65, while your spouse at 62) like the following: just find your closest age in the left column, then find the number closest to your household income gross annual along the top row.

Keep in mind that these numbers are a rough estimate of what your savings goal should look like and that several factors could affect your propensity to set aside.

Youth is on our side when it comes to long-term savings: the sooner we start saving, the more time we have to keep saving. The more your money is on the market, the more it grows. One of the simplest ways to save for retirement is to open a pension fund (and/or a classic "PAC" savings plan). Experts recommend setting aside 10% to 20% of each salary for retirement savings (even for those on intermittent contracts). You have to increase the amount saved for retirement every time you get a raise - this is very beneficial for younger savers because younger savers will experience more salary increases over the course of their career than someone who has started saving later. More salary increases mean more money to spend and save. Make sure you have a solid financial base before you start saving (an emergency fund, a savings cushion, don't run up on credit card debt: this is because when you are at work and start making money, you can really save most of it for retirement), although it's never too early to start saving for retirement. Last but not least: let yourself be guided by an expert, a financial advisor.