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How much is enough to retire?

Ed Monk

Ed Monk - Fidelity Personal Investing

It’s a tough question to answer. None of us really know how long we’ll live or what spending demands will be placed upon us during retirement, which could last many decades. Then there’s the unpredictability of financial markets which will also partly determine how our savings will grow over the years leading up to retirement.


With all that uncertainty, a target level of saving that would give you a decent standard of living in retirement would be a great thing to have. It wouldn’t make hitting your target any easier, but it would allow you to know in good time how you’re progressing and to make changes along the way to improve your chances.

With that in mind, Fidelity has worked to produce three retirement rules of thumb which can help you understand how much you’ll need to enjoy a retirement that meets your expectations.

Rule 1: The power of 7

Fidelity’s research found that UK households who manage to save seven times their annual household income by the age of 68 should be able to retire and maintain a similar standard of living as in their working life.

This assumes that the household will include two people, both of whom are entitled to a full state pension.

While a goal of seven may sound challenging, the key is to start as early as possible and aim to meet a series of savings milestones along the way. Our analysis suggests UK households aim to save at least one times their annual income by the age of 30 to begin their retirement journey.

Age Income multiple
30 x 1
40 x 2
50 x 4
60 x 6
68 x 7

Income multiples to save at each age

Rule 2: When 13 is a lucky number

Knowing how big your pot needs to be before you can retire is important but, in order to hit that target, it is vital to also know how much of your earnings you need to save at much younger ages.

Our research suggests that savers should be putting away at least 13% of their pre-retirement annual income before tax, each year, from the age of 25. Recent increases in the minimum auto-enrolment contribution rate mean that, for many of those who are in formal employment, at least 8% might be taken care of by saving into a workplace pension and making the most of employer matched contributions. This leaves you with a 5% shortfall to make up yourself via a savings vehicle of choice such as an ISA or personal pension.

But remember: The longer you wait before you start saving, the higher contributions have to be in order to hit your retirement target.

Starting age Saving rate
25 13%
30 15%
35 18%

Savings rate at each age in order to retire at 68

Rule 3: Limit yourself to a 5% withdrawal - and stay flexible

One of the biggest challenges people face when it comes to planning their retirement is determining how long their pension pot needs to last for. Based upon an assumed retirement age of 68 and a retirement timeline of 25 years, our calculations suggest that a withdrawal rate range of between 4.1% and 4.4% in the first year of retirement is potentially sustainable - with a maximum withdrawal rate of 5%.

Of course, this will vary based upon things you can’t control - like how long you live, inflation, market returns - and things over which you have some degree of control, like your chosen retirement age.

Source: Fidelity International, September 2019

Important information The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. The Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at or over the telephone on 0800 138 3944. Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.


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