The earlier you plan, the better.

Why You Need To Think About Retirement

Working backwards to figure out how much to save.

How Much Will You Need?

How compounding reduces the amount you need to save

Why You Should Start Saving Early

The different types of pensions – and why you should have one

Pension Picking

How to get paid without working

Getting A Forever Income

consumer discretionary

inflation

tech

interest rates

portfolio construction

information technology

macroeconomics

software

stocks

Learn how to use a pension to get prepared for retirement

Pensions And Retirement

How to fund your post-work world

Thinking About The Future: How Getting Your Pension Set Up Right Today Pays Dividends In Retirement

And while £6 might not seem like much of a difference, over time your returns will grow exponentially. After 35 years, that £7,000 will grow to almost £20,000 – and that’s *without* you saving any more. If you contribute regularly, a £350 payment each month will get you to £250,000 in the same time. And 3% is a pretty conservative return – if you get 5%, you’ll need less than £250 a month. Of course, there’ll inevitably be more risk involved there.

**Is there another way to reduce my monthly contributions?** If you’re blessed with youth, there might be. The earlier you start saving, the more your savings can compound – and the better off you’ll be. If you started saving at 20, saving £225 a month at a 3% return would have you sitting on £250,000 at 65.

Those payments are still high, of course – most 20-somethings don’t have enough disposable income for it to be sustainable, and while you’re young you might want to spend more (to travel while you’re fit and mobile, for example). But don’t worry: you can always start small, and simply save more as you earn more. Just remember that the more you save while you’re young, the better off you’ll be at retirement.

Setting this money aside can be tricky, but budgeting can help you get ahead. Tot up your essential monthly outgoings, set aside some cash for general costs (your Finimize subscription won’t pay for itself 😉) and decide how much of what you’ve got left over to save each month. It’s best to set up automatic payments to move those savings into a dedicated retirement account as soon as you get paid each month – then you won’t be tempted to dip into it.

Speaking of which… you almost certainly *shouldn’t* be building your retirement pot in a normal bank account. There’s a special product for you instead: it’s time to show you the pensioner’s secret.



**How can I possibly save £250,000?!** We get the panic. Let’s say you’re 30, and want to retire at 65: you’d have to save more than £7,000 a year to amass your sum in time. But there’s a way to reduce those annual payments: investing.

It’s all down to one of the most powerful forces in finance: compounding. If you had £7,000 and invested it at a 3% annual rate of return, you’d end up with £7,210. The following year, you’d make £216 – £6 more than the year before. That’s because the £210 you earned the first year starts generating its *own* returns 🙌



**What is a pension?**Pensions are a type of investment account that offer a whole bunch of attractive benefits, all designed to encourage people to save for retirement.

For a start, you get UK tax relief on pension contributions – the government effectively tops up your pension with the amount you would have paid in income tax on that sum (the exact mechanics of this depend on the type of pension you have, and there’s a £40,000 annual limit on tax-free contributions). If you’re a basic rate taxpayer and put £200 in your pension each month, you’ll essentially get £40 free cash from the taxman 💸

You also get tax relief when you withdraw from your pension: once you retire, you can usually draw down 25% of your pension tax-free (again, there’s a [maximum limit](https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance) on this). There’s a tradeoff though: if you want to access the cash *before* you’re 55, you’ll have to pay huge fees and taxes, except in [certain cases](https://www.pensionbee.com/pensions-explained/pension-withdrawal/early-pension-release) where your life expectancy is significantly reduced.

**How do pensions work?** ****There are lots of different types of pensions, and each works a bit differently. As we looked at earlier, the government provides a ******state pension**, paid as a monthly sum once you’ve retired. The amount you get depends on how much National Insurance you’ve paid throughout your working life. But even if you’re getting the full whack, this probably won’t make up the majority of your retirement income 🤔

If you work in the public sector or for some large companies, you might have a **defined benefit** pension: one that guarantees you a certain level of income throughout your retirement. For example, it might guarantee that you get your final salary (or a percentage of it) every year for the rest of your life. If you’ve got one of these, you won’t have much involvement with it – other than taking the payments once you retire.

More common is a **defined contribution** pension. This might be set up by your employer, or by you privately (if you’re self-employed, for example). With these, you contribute each month while you’re working, and can then access whatever’s accumulated when you retire. You’ll have the ability to influence how that cash provides you with a retirement income – more on that next session.

It’s worth noting that, if you’re enrolled in a defined contribution workplace pension scheme (and if you’re over 22 and in full-time employment, your employer legally has to give you one), your employer will also contribute to your pension pot – basically giving you a delayed bonus. Many employers will offer to match your contributions up to a certain level, and it’s almost always worth maxing this out. After all, it’s free money… 🤑

**Do these pensions stay as cash?**Not normally – instead the money is invested by a pension fund manager in order to generate returns and build your wealth over time. Most pension providers will offer you a range of portfolios to choose from. As with all investing, you should be smart about how you invest: have a diversified portfolio and adjust your risk to what you can stomach. If you’re young, it probably makes sense to go for the highest-risk (and highest-reward) option: many pensions will automatically rebalance your portfolio as time goes on, shifting you into less risky assets as you near retirement so your pot’s more secure when you need it.

Unlike with other investments, you might not have a ton of control over where your pension is invested beyond that: choosing individual stocks usually isn’t allowed. If you’re adamant on picking exactly what’s in your portfolio, you’ll need a **Self-Invested Personal Pension** (SIPP), which lets you fully manage your own fund. But with great power… 🕷

Pay into your pension sensibly, and future you should hopefully retire with a nice chunk of change. Then all that’s left is to figure out what to do with it…



**How do I make sure I’ve got a regular retirement income?** If your pension’s big enough and it’s invested in a safe portfolio of stocks and bonds, you *should* be able to draw down a small amount each year without running out of cash. But you’re betting on the stability of markets here: there’s a chance you could run out, and if you do and can’t get a job (the robots most likely having taken over [at McDonald’s](https://www.businessinsider.com/fast-food-hiring-senior-citizens-instead-of-teenagers-2018-11?r=US&IR=T) by then), you could find yourself in big trouble 🤕

Fortunately, you’ve got another option. An **annuity** is a financial product designed to keep people secure in their retirement. If you buy one up front, you’ll be paid a regular income – and depending on the type of annuity you choose, you might have that income guaranteed *forever*. The amount you’ll get varies, and might be very different when you retire to now – right now, a 65-year-old can get around 5% of the annuity’s value in income each year. That means to guarantee £10,000 a year until you die, an annuity costs just over £200,000. If you want extra bonuses like an income that increases with inflation, or guaranteed payments to your partner or kids even after you die, it’ll cost you more.

**Is there any other way to get an income when I’m retired?** You could try setting yourself up with a “passive income” – money that comes your way without you working. An investment portfolio with high dividend payments is one option, and another popular approach is buy-to-let property. That’s where you become a professional landlord, living off the rental payments from your real estate empire. But there are risks involved: the properties could remain unlet for long periods of time, and your income might end up being lower than you expected 🏚

Bear in mind, too, that just because you’re old you won’t escape tax completely. A combination of state and private pension income, even without any passive cash coming in, will likely push you above the “[personal allowance](https://www.gov.uk/tax-on-pension)” threshold. So you may need to plan ahead – and adjust your retirement plan accordingly.

Retirement, just like the rest of life, is no sure thing. But by preparing now, you can give future you the best chance of a post-work world filled with fine chateaux – not financial woe. And ultimately, that’s what money’s all about: allowing you to minimize uncertainty and stress and focus on living your life, whatever stage of it you’re at. So congratulations on taking the time to educate yourself on improving your future finances, and good luck – we’re sure you’ve got an exciting few years in store.

**In this Pack, you’ve learned:**

**🔹**Thanks to compounding, prepping for your retirement now will pay off later

**🔹**You’ll need at least 25 times your desired income in a pension pot

**🔹**Taking advantage of your pension’s tax benefits and your employer contributions will save you money

**🔹**Buying an annuity can guarantee you income for life, but it’ll cost you.



__How much will I need to retire?__ As with so many financial questions… it depends. First, you’ve got to figure out how much you’ll be spending each year. From there, you can work backwards to calculate how much you’ll need to have saved up – and therefore how much you should start saving now ☝️

A good rule of thumb is that to maintain the same lifestyle you had when you were working, your annual retirement income should be two thirds of your pre-retirement income. That’s on the assumption that you’ll need less money than when you were working because you won’t have a mortgage or rental costs – if you still have those, you’ll probably need more.

If you’ve worked for long enough, you may be eligible for a state pension – in the UK, that’s [currently](https://www.gov.uk/new-state-pension/what-youll-get) around £9,000 a year after 35 years of National Insurance payments. That reduces the amount you’ll need to provide yourself, but you won’t be able to claim it until you reach the state pension age. In the UK, that’s currently 68 – but it might be higher by the time you get there.

The state pension is also unlikely to be enough to support you fully. The average UK salary is around [£29,000](https://www.findcourses.co.uk/inspiration/articles/average-salary-uk-2018-14105). Two thirds of that is £19,000, and subtracting the full state pension still leaves you with a £10,000 annual shortfall 😬

Of course, if you want to enjoy a lavish life when you’re older, you’ll need a bigger pot. If you’re planning on regular trips abroad and a new car here and there, consumer group Which? [says](https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p) you’d need a pot of £33,000. In reality, the median disposable UK retirement income is £23,888. But for simplicity’s sake, we’ll stick with that £10,000 a year figure as a target for now.

__So how much do I need to save?__ You know the score by now: it depends! Specifically, it depends on how long you think your retirement’s going to be. If you want to wave goodbye to work at an early age and want your cash to last you _comfortably_ (as well as have some left to pass onto your loved ones once you’re gone), the general rule is to multiply your needed income by 25 to find the required size of your pot – £250,000 in our case.

As long as you live within your means, your portfolio should always be generating more returns than the amount you’re withdrawing, so you shouldn’t be at risk of running out. But as with anything involving the markets, it’s still worth remembering that it carries some risk. When markets collapsed in the last financial crisis, for example, some suddenly found themselves with a much more limited retirement than they’d hoped. Instead, you might want to sacrifice the hope of endless returns in exchange for a guaranteed-income “annuity”. The costs for those vary – more on all that later.

Either way, you’re going to need quite a lot saved up. Fortunately, however, amassing a big pile of cash isn’t as hard as it seems…

Retirement can seem like a long way off: the sort of thing only someone a lot older (and a bit grayer 👴) needs to think about. Pensions, annuities, defined contributions – surely you can get away with leaving those till you’re in your 60s, right?

**This feels like a trick question…** You got us. While it may be decades away, planning for retirement while you’re still young is crucial – and future you will be *very* grateful.

That’s because setting yourself up for a financially secure retirement is a much bigger endeavor than you might imagine. Bumbling around in the south of France and writing your memoirs costs money, after all – and then there’s the grandkids’ birthdays to consider. Without a regular paycheck coming in anymore, you’ll instead need a bunch of cash saved up to fund your well-earned relaxation 🏖

Those retirement savings don’t just appear out of thin air: you’ve got to build them over time. And as we’ll explore in this Pack, the earlier you start saving for retirement, the better. We’ll also look at how you can play it smart by taking advantage of tax-reducing initiatives like pensions. Maximizing your returns means more Malbec – and fewer migraines.

**But how can I begin planning for something so far in the future?** Obviously you can’t know exactly what your retirement will look like. But we do know two things: it’s fairly likely that you’ll live into your seventies, and it’s fairly likely that you’ll want to quit working before you die. Sure, plenty of things may change between now and then – and that billion-dollar idea you’re sitting on *might* end up making your pension pot look like pocket change. But putting some cash aside for tomorrow today is only prudent. It may involve making a couple of small sacrifices – but planning for retirement now will make future you much, much better off in the long run 😇

With that in mind, it’s worth working on the assumption that your career will follow its current trajectory – and taking any unexpected events as they come.

To kick us off, then: how do you figure out how much you’ll need to retire?

*Note: this Pack contains some specific tips for UK Finimizers – but it’s still worth reading wherever you are.*



Pack

chapterSlugOrId

encryptedEmail

planSlug

ContentPieceChapterQuery

viewer

authorization

content

SingleContentPieceChapter_viewer

webSubscriptions

mostPopularTags

query ContentPieceChapterQuery(
  $chapterSlugOrId: String!
  $encryptedEmail: String
  $planSlug: String
) {
  viewer {
    authorization {
      roles {
        isAnonymous
      }
      ...SingleContentPieceChapter_authorization
    }
    ...SingleContentPieceChapter_viewer_2HyoJ4
    content(encryptedEmail: $encryptedEmail) {
      ...SingleContentPieceChapter_content
      contentPieceChapter(slugOrId: $chapterSlugOrId) {
        __typename
        ...SingleContentPieceChapter_contentPieceChapter
        id
      }
    }
    id
  }
}

fragment AnonymousPaywall_viewer_2HyoJ4 on Viewer {
  webSubscriptions {
    defaultWebPlan {
      ...PremiumAccountPromotionPanel_webPaymentPlan_2HyoJ4
    }
  }
}

fragment AudioOnlyBanner_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  headerImage {
    ...ServerImage_image
  }
  title
}

fragment AuthorLinkWrapper_author on Author {
  slug
  isActive
}

fragment Avatar_image on URLImage {
  original
}

fragment Block_block on ContentPieceBlock {
  __isContentPieceBlock: __typename
  __typename
  ... on TextBlock {
    id
    ...TextBlock_block
  }
  ... on ImageBlock {
    id
    ...ImageBlock_block
  }
  ... on QuoteBlock {
    id
    ...QuoteBlock_block
  }
}

fragment ChapterSelector_contentPieceChapter on ContentPieceChapterInterface {
  __isContentPieceChapterInterface: __typename
  contentPiece {
    __typename
    title
    chapters {
      __typename
      title
      subtitle
      id
      slug
    }
    id
  }
}

fragment ContentAuthorAndMetadata_author on Author {
  id
  byline
  profilePicture {
    ...Avatar_image
  }
  ...AuthorLinkWrapper_author
}

fragment ContentHeaderDetails_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  ...ContentMetadata_contentPiece
  ...ListenButton_contentPiece
  ...DownloadContentButton_contentPiece
  ...ContentPieceBookmarkIcon_contentPiece
  id
  title
  deepLink
  canonicalLink
  slug
  hasChapters
  chapters {
    __typename
    id
    slug
  }
  author {
    ...AuthorLinkWrapper_author
    ...ContentAuthorAndMetadata_author
    id
  }
}

fragment ContentHeader_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  ...DefaultContentHeader_contentPiece
  ...EvergreenContentHeader_contentPiece
  contentPieceType {
    name
  }
}

fragment ContentMetadata_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  consumptionTime
  dateUpdatedDisplay
  contentPieceType {
    isEvergreen
  }
  author {
    byline
    ...AuthorLinkWrapper_author
    id
  }
}

fragment ContentPieceBookmarkIcon_contentPiece on ContentPiece {
  id
  isBookmarked
  title
}

fragment ContentPieceChapterSEO_contentPieceChapter on ContentPieceChapterInterface {
  __isContentPieceChapterInterface: __typename
  title
  contentPiece {
    __typename
    byline
    imageForSeo: headerImage {
      url: full
    }
    id
    title
    seoTitle
    searchDescription
  }
  subtitle
  firstPublishedAt
  id
  ... on PublicContentPieceChapter {
    globalContentPieceChapterId
    slug
  }
}

fragment ContentPieceSponsor_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  sponsoringCompany {
    id
    name
    link
    logo {
      ...ServerImage_image
    }
  }
}

fragment DefaultContentHeader_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  ...ContentHeaderDetails_contentPiece
  ...AudioOnlyBanner_contentPiece
  ...KeyInsights_contentPiece
  id
  title
  headerImage {
    ...ServerImage_image
  }
}

fragment DownloadContentButton_authorization on Authorization {
  roles {
    isB2bUser
  }
}

fragment DownloadContentButton_blocks on ContentPieceBlock {
  __isContentPieceBlock: __typename
  ... on TextBlock {
    textMarkdown
  }
}

fragment DownloadContentButton_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  id
  title
  isAvailableToProducts
  blocks {
    __typename
    ...DownloadContentButton_blocks
    ... on Node {
      __isNode: __typename
      id
    }
  }
  chapters {
    __typename
    id
    title
    blocks {
      __typename
      ...DownloadContentButton_blocks
      ... on Node {
        __isNode: __typename
        id
      }
    }
  }
  keyInsightsBlocks {
    id
    ...DownloadContentButton_blocks
  }
}

fragment EvergreenContentHeader_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  ...ContentMetadata_contentPiece
  ...ListenButton_contentPiece
  ...ContentPieceSponsor_contentPiece
  ...ContentPieceBookmarkIcon_contentPiece
  canonicalLink
  id
  deepLink
  title
  slug
  hasChapters
  chapters {
    __typename
    id
    slug
  }
  headerImage {
    ...ServerImage_image
  }
  ...DownloadContentButton_contentPiece
}

fragment ImageBlock_block on ImageBlock {
  image {
    ...ServerImage_image
  }
  alt
  caption
  link
}

fragment KeyInsightsBlock_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  keyInsightsBlocks {
    id
    textMarkdown
  }
}

fragment KeyInsightsCarousel_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  keyInsightsBlocks {
    id
    textMarkdown
  }
}

fragment KeyInsights_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  ...KeyInsightsCarousel_contentPiece
  ...KeyInsightsBlock_contentPiece
  keyInsightsBlocks {
    id
    textMarkdown
  }
}

fragment ListenButton_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  id
  title
  trackingTitle
  subtitle
  readingTime
  isPremium
  hasBlocks
  hasChapters
  hasAudio
  contentPieceType {
    name
    trackingName
  }
  ...AudioOnlyBanner_contentPiece
}

fragment LoggedInPaywall_viewer_2HyoJ4 on Viewer {
  webSubscriptions {
    defaultWebPlan {
      ...PremiumAccountPromotionPanel_webPaymentPlan_2HyoJ4
    }
  }
}

fragment MainContentChapterSection_contentPieceChapter on ContentPieceChapterInterface {
  __isContentPieceChapterInterface: __typename
  globalContentPieceChapterId
  title
  trackingTitle
  isFirstChapter
  subtitle
  readingTime
  hasBlocks
  hasAudio
  id
  deepLink
  blocks {
    __typename
    ...Block_block
    ... on Node {
      __isNode: __typename
      id
    }
  }
  siblingChapters {
    id
  }
  contentPiece {
    __typename
    ...ContentHeader_contentPiece
    id
  }
  ...ChapterSelector_contentPieceChapter
  ...NextPreviousChapter_contentPieceChapter
  ...ContentPieceChapterSEO_contentPieceChapter
}

fragment MostPopularTags_tags on GenericTagConnection {
  edges {
    node {
      __typename
      ... on AssetClassTag {
        slug
      }
      ... on ContentTag {
        slug
      }
      ... on GeographyTag {
        slug
      }
      ...Tag_tag
      ... on Node {
        __isNode: __typename
        id
      }
    }
  }
}

fragment Navigation_authorization on Authorization {
  roles {
    isB2bUser
  }
}

fragment Navigation_tags on GenericTagConnection {
  ...MostPopularTags_tags
}

fragment NextPreviousChapter_contentPieceChapter on ContentPieceChapterInterface {
  __isContentPieceChapterInterface: __typename
  globalContentPieceChapterId
  siblingChapters {
    title
    subtitle
    globalContentPieceChapterId
    slug
    id
  }
}

fragment PaywallBanner_contentPieceType on ContentPieceType {
  isAvailableForFreemium
}

fragment PaywallBanner_viewer_2HyoJ4 on Viewer {
  ...AnonymousPaywall_viewer_2HyoJ4
  ...LoggedInPaywall_viewer_2HyoJ4
}

fragment PremiumAccountPromotionPanel_webPaymentPlan_2HyoJ4 on WebPaymentPlan {
  amount
  currency
  currencySymbol
  interval
  promotionApplied(slug: $planSlug) {
    stripeDiscount {
      discountPct
      discountAmount
      id
    }
    id
  }
}

fragment QuoteBlock_block on QuoteBlock {
  quote
  caption
}

fragment ServerImage_image on URLImage {
  full
}

fragment SingleContentPieceChapter_authorization on Authorization {
  ...authorization_authorization
  ...DownloadContentButton_authorization
  ...Navigation_authorization
  roles {
    hasPremiumSubscription
    isPreviewing
    isAnonymous
    isPreviewingContentAllowance
    isFreemium
  }
}

fragment SingleContentPieceChapter_content on Content {
  ...authorization_content
  anonymousUserHasPremium
}

fragment SingleContentPieceChapter_contentPieceChapter on ContentPieceChapterInterface {
  __isContentPieceChapterInterface: __typename
  ...MainContentChapterSection_contentPieceChapter
  hasAudio
  globalContentPieceChapterId
  hasBlocks
  isPremium
  trackingTitle
  contentPiece {
    __typename
    ...authorization_contentPiece
    ...AudioOnlyBanner_contentPiece
    globalContentPieceId
    trackingTitle
    isPremium
    contentPieceType {
      name
      trackingName
      isAvailableForFreemium
      ...PaywallBanner_contentPieceType
    }
    id
  }
}

fragment SingleContentPieceChapter_viewer_2HyoJ4 on Viewer {
  ...PaywallBanner_viewer_2HyoJ4
  mostPopularTags(first: 10) {
    ...Navigation_tags
  }
}

fragment Tag_tag on GenericTag {
  __isGenericTag: __typename
  __typename
  ... on AssetClassTag {
    name
    slug
  }
  ... on GeographyTag {
    name
    slug
  }
  ... on ContentTag {
    name
    slug
  }
}

fragment TextBlock_block on TextBlock {
  textMarkdown
}

fragment authorization_authorization on Authorization {
  roles {
    isPreviewingContentAllowance
    isPreviewing
    isAnonymous
    hasPremiumSubscription
    isFreemium
  }
}

fragment authorization_content on Content {
  anonymousUserHasPremium
}

fragment authorization_contentPiece on ContentPieceInterface {
  __isContentPieceInterface: __typename
  isPremium
  contentPieceType {
    isAvailableForFreemium
  }
}
