My grandmother would often say to me, if I was being too smart, “I have seen more Diwalis than you”. Whilst I wish she’d seen many more, this Diwali as we look at COP26, we hope our grandchildren will see many more Diwalis.
I thought the Prime Minister of India’s commitment was focussed, determined, clear and serious. As the world turns to India, India again does her duty in times of war and peace. It didn’t surprise me the Chinese sulked away and have done nothing for the world yet again. The virus of Communism is destroying their souls. The BBC documentary on Chinese spies in Western societies to steal and promote their world view is shuddering it. ‘BBC – China’s Magic Weapon’. Brazil’s leader did not show up. Pakistan’s leader cried off too.
So let us turn to old age and my expertise of investing and the importance of how to live a better retirement. The need, given the budget last week is timely.
How Much Money Do You Need For Retirement?
Retirement is a dream for almost everyone. Relaxing, traveling, enjoying family — they should be the best years of our lives. But how much money do you need for retirement?
Working out how much money you need for retirement depends on a variety of factors. One of the most important considerations is your standard of living. The Pensions & Lifetime Savings Association (PLSA) suggests that a retired couple's minimum is around 17K a year. For a single person, they recommend 11K. Well in London, that isn’t going to work, is it?
For a more comfortable retirement, the costs shoot up. The PLSA proposes something in the region of 30K for a couple who want to holiday a few times a year and enjoy other luxuries. Typical convention holds that retirees need around £1million. The 4% rule suggests an annual income of £40,000. However, retirees will need to factor in tax on their pensions.
Do I Need £1m for Retirement?
But do you really need a pension that large for retirement? A lot depends on your future expenses, like healthcare or holidays. One of the other significant factors that affect how long a pension lasts is location. Choosing the correct city to retire in can make a considerable difference. Either way, many suggest that the general rule is that you'll require about 60-70% of your pre-retirement income.
Of course, not everyone will have the luxury of a million-pound pension pot. Many retirees will need to get by on half that amount. It's never too early to start thinking about retirement — even if you're in your 20s.
The Importance of Saving and Investing
The UK state pension is less than £10K per year. While this sum is not insignificant, it falls short of the amount required for a comfortable retirement. Most people will struggle to live on that budget, which underlines the importance of saving and investing.
Saving is a good step, but low bank saving interest rates barely keep up with inflation. As a result, investment should form a vital part of your retirement strategy. The S&P 500 regular returns around 8-10% on investment. A 35-year plan with monthly investments of just £483.60 could make you a millionaire.
The S&P 500s performance in recent years has been incredible. £500 per month invested in the index over the last 40 years would be worth a staggering £3.3 million today. Purchasing exchange-traded funds, also known as ETFs, is a great way to track an index like the S&P 500. Additionally, you could potentially gain market-beating returns with some savvy stock picking and a bit of research.
Of course, not everyone has a spare £500 per month. However, experts suggest that investors abide by the 50-15-5 rule. In short, that means investing about 15% of your earnings each year.
Summary
Retirement is full of many surprises; not all of them are pleasant. Increased life expectancy, taxes, and inflation are all factors that can chip away at a pension. Retiring with a comfortable amount takes discipline and some good choices. No matter your age, investing with an eye on retirement is a smart move. Retiring with a million is more than possible.
