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Harvey Jones

Six steps to a happy retirement

Saving for retirement can seem daunting but it will be a lot easier if you break things down into different stages rather than trying to do everything at once. The following six-point plan could help you put your retirement plans on track and build a successful future, one step at a time. The alternative, actually, there isn't an alternative. Nobody is going to do this for you.

Step one. Work out how much you need to save retire comfortably.

When saving for the future, it helps to set yourself a target. By having a clear goal, you are more likely to push yourself to get there.

Your target partly depends on personal factors such as when you plan to retire and how much you can afford to save each month.

You also need to work out how much income you want in retirement, and here something called the 4 per cent rule can help.

That is the percentage of your pension you can safely draw each year without running out of money before you die.

So for each USD$100,000 in your pot you can safely draw $4,000 a year. If you had $1 million, you could draw $40,000 a year.

That may seem a low reward for all that effort, but nobody said pension planning was easy. That's why you have to start early. It isn't all bad news, though.

Step two. Check how much you have already saved.

With luck, you will be well on the way to hitting your target as you will have already have a mix of pensions and other investments.

Work out where you stand today by assembling all your retirement savings, including any state pension entitlement, company pension pots, personal pensions and other investments.

Now is the time to hunt down any lost pensions and savings plans, including from former employers. This will show where you stand now, and how much further you have to go.

Step three. Work out how much you need to save each month.

Now you need to plug the gap between how much you have saved and how much you need to save.

Let's say you have $300,000 in your various pots and are aiming for $1 million. So you need another $700,000. I'm not scaring you, am I?

How much you need to save will partly depend on your age. If you are 30 and plan to retire at 65 you will have to invest around $90 a month for each $100,000 of pension pot.

So to save $700,000, you would have to set aside $630 a month.

These figures assume your investments grow at an average rate of 6 per cent a year after charges.

At age 40, you would have to save $165 a month for every $100,000 of pension by age 65, so you need to save $1,155 a month to hit $700,000.

At 50, that rises to $355 per $100,000 – that’s $2,485 a month to hit $700,000. The first dollar or pound or euro you save is the most important, because it has longest to grow – so start as early as you can.

You should also keep charges to a minimum by investing in flexible, low-cost vehicles such as exchange traded funds (ETFs) through a competitively priced online platform designed specifically for globally mobile expats. High charges will act as a drag on growth, making it harder to hit your targets.

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Internaxx Bank S.A. accepts no responsibility for the content of this report and makes no warranty as to its accuracy of completeness. This report is not intended to be financial advice, or a recommendation for any investment or investment strategy. The information is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Opinions expressed are those of the author, not Internaxx Bank and Internaxx Bank accepts no liability for any loss caused by the use of this information. This report contains information produced by a third party that has been remunerated by Internaxx Bank.

Please note the value of investments can go down as well as up, and you may not get back all the money that you invest. Past performance is no guarantee of future results.

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