How Much To Save? - A Rule of Thumb for New Savers

If you haven’t yet started to save for your retirement, the following can be used as a basic guideline, based on some typical assumptions, including:

  • You plan for 80% replacement of pre-retirement pre-tax income, adjusted for inflation and with a high likelihood of being sustained for up to 30 years (retirement at age 65)
  • State pension or other income will provide 25% of your retirement income needs each year

Starting early is important, because once you start, the same savings goal applies until you retire.  For example, if you start saving roughly 12% of your income in your mid-20s and have the discipline to maintain your savings plan, you shouldn't have to increase that percentage as you go through your 30s, 40s and so on.

The above table is of course just a general guideline - a rule of thumb.  The key essentials are:

  • Start early and save what you can afford, when you can afford

  • Make your money work hard for you through a diversified range of investments

  • Review progress against targets on a regular basis, and adjust as required