How big should my pension pot be at 40
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Have you ever asked yourself: “How big should my pension pot be at 40?” If so, within this article we aim to help you answer that question.
Retirement might seem a long way off, but the clock is ticking. At 40, you’ve probably started to think about your pension and whether it’s time to start making bigger contributions or set up a pension if you haven’t done already.
If you are someone who has been making pension contributions for a number of years and you’ve saved up a substantial amount into your pension pot by the time you hit 40, well done! However, do you have enough money to live off? Are you going to be able to sustain your lifestyle without working? Let’s find out below!
Am I saving enough for a good pension pot?
If you have been wondering if you’re saving enough money for retirement and you’re not sure how much you’ll need, here’s a quick and easy way to work it out.
According to HSBC, to calculate how much you should be saving towards your pension, divide your age by two, then use this figure as the percentage of your salary you should aim to be saving each year.
Half your age pension rule
This rule of thumb has been recommended by many financial experts. If you begin saving at age 20, you should aim to be putting away 10% of your annual income; if you begin at 30, 15% of your income is recommended; and so forth.
So, therefore, It is suggested that at the age of 40, you should really be putting 20% of your wages into your pension pot. This is a 5% increase up from the suggested amount in your thirties.
Of course, this percentage is just a recommendation and every circumstance is different. If you are able to save more than 20% then even better. As mentioned above, the more money you’re able to put into your pension pot, the more compounding interest you will earn.
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Average pension pot
How big should my pension pot be at 40?
If this sounds like you, then obviously to sustain this lifestyle you will need more money in your pension pot at 40 than you probably think. On the other hand, If you live a very modest and budget-friendly lifestyle, your pension pot may not need to be as big as you think.
UK pension pot statistics
In 2018/19, the average State Pension amount in the UK was £176 a week.
The earliest age at which you can usually withdraw cash from your pension fund is 55.
In 2019, the average age of retirement in Britain was 65 for men and 64 for women.
The average pension pot at 65 in the UK is currently £61,897
17% of Brits aged over 55 have no private pension savings.
A single person’s full new State Pension was £175.20 a week in 2019/20.
In 2017/18, 10.4 million individuals were contributing to a personal pension in the UK.
Over three-quarters of UK jobholders were members of a workplace pension scheme in 2019.
The total private pension wealth in Great Britain from April 2016 to March 2018 was £6.1 trillion.