Retirement Planning FAQ

When Should I Start Saving for Retirement?

The short answer: as soon as possible. The ideal time to start saving for retirement is in your 20s when you first start earning. Starting early maximises the power of compound growth—your money has more time to grow, and early contributions generate the largest returns.

If you didn't start in your 20s, start now. Starting at 30 is better than 35, starting at 40 is better than 45, and so on. While late starters face challenges, beginning immediately is always better than continuing to delay.

Many financial advisors recommend saving at least 10-15% of your income for retirement, starting as early as possible. If your employer offers pension matching, contribute enough to get the full match—it's essentially free money.

How Much Should I Save Each Month?

The amount you should save depends on your age, income, retirement goals, and when you start saving. A common guideline is to save 15-20% of your income for retirement. However, if you start late, you may need to save 25-30% or more to catch up.

Rather than a fixed percentage, it's better to calculate your specific needs based on:

• Your desired retirement lifestyle
• Your expected retirement expenses
• Your planned retirement age
• Your expected retirement duration
• Other income sources like the State Pension

Use a retirement calculator to determine how much you need to save monthly to reach your goals. The calculator can account for your specific circumstances and provide a personalised savings target.

Can I Retire Early?

Early retirement is possible, but it requires careful planning and typically higher savings rates. To retire early, you need to accumulate enough savings to cover your expenses for a longer retirement period and to bridge the gap until you can claim the State Pension.

Early retirement considerations include:

• Higher savings requirements—often 50-70% of income during your working years
• No access to the State Pension until you reach State Pension age (currently 66)
• Healthcare costs before NHS pensioner benefits apply
• Longer investment horizon requiring sustainable withdrawal strategies
• Potential need for part-time work or side income in early retirement

The FIRE (Financial Independence, Retire Early) movement has popularised early retirement, but it requires significant sacrifice and discipline. Use a retirement calculator to model early retirement scenarios and understand what's required.

How Long Will Retirement Last?

Retirement duration depends on when you retire and how long you live. With increasing life expectancy, many people spend 25-30 years in retirement, and some spend 35 years or more.

For planning purposes, it's wise to assume retirement will last until at least age 90, or even 95 if you have good family health history. Planning for a longer retirement ensures you won't outlive your savings.

The longer your retirement, the more you need to save. A 30-year retirement requires significantly more savings than a 20-year retirement, even if your annual expenses are the same. This is why longevity risk—the risk of outliving your savings—is a key consideration in retirement planning.

What Happens If I Run Out of Money?

Running out of money in retirement is a serious concern, but there are options if it happens:

• State Pension: The State Pension provides a basic income that you can claim from State Pension age, regardless of your other savings
• Pension Credit: If you have low income and savings, you may qualify for Pension Credit, which tops up your income
• Equity Release: If you own your home, equity release schemes can provide income by borrowing against your property value
• Family Support: Adult children or other family members may provide financial assistance
• Return to Work: Part-time work or consulting can generate income in retirement
• Downsizing: Moving to a smaller home can free up equity and reduce ongoing costs

However, these options are often less desirable than having adequate savings. Planning to avoid running out of money is far better than relying on backup options.

Should I Pay Off Debt Before Saving?

The answer depends on the type of debt and interest rates. Generally:

• High-Interest Debt: Pay off credit cards, payday loans, and other high-interest debt before prioritising retirement savings. The interest rates on these debts typically exceed investment returns.
• Low-Interest Debt: For mortgages or other low-interest debt, you may balance debt repayment with retirement saving. If your mortgage rate is lower than your expected investment returns, you might prioritise retirement savings.
• Employer Matching: Always contribute enough to get full employer pension matching before paying extra on low-interest debt. The match is essentially a 100% return.

A balanced approach often works best: eliminate high-interest debt first, then split available money between debt repayment and retirement savings based on interest rates and your comfort level.

How Often Should I Review My Plan?

Review your retirement plan at least annually. More frequent reviews may be appropriate during volatile market periods or when major life events occur.

During your annual review, assess:

• Whether your savings rate is adequate for your goals
• If your investment allocation remains appropriate for your age and risk tolerance
• Whether your retirement goals or timeline have changed
• If your expected expenses have changed
• Whether you're on track to reach your savings target

Also review your plan when major life events occur: marriage, children, job changes, inheritance, or significant health changes. These events can dramatically affect your retirement planning needs.

What Investment Return Should I Assume?

For retirement planning, it's better to use conservative return assumptions rather than optimistic ones. Most financial advisors recommend assuming 5-7% annual returns for a diversified investment portfolio.

This assumption accounts for:

• Historical stock market returns (approximately 7-10% annually before inflation)
• The impact of inflation (reducing real returns by 2-3%)
• The drag of investment fees
• The possibility of below-average returns, especially given current market valuations

Using conservative assumptions provides a safety margin. If actual returns are higher, you'll have more than you need. If they're lower, you won't face a shortfall. It's far better to be pleasantly surprised than disappointed in retirement.

How Does the State Pension Fit In?

The State Pension provides a foundation of retirement income, but it's rarely sufficient on its own. The full new State Pension is £241.30 per week (2026/27), or approximately £12,547.60 annually.

To receive the full State Pension, you need 35 qualifying years of National Insurance contributions. You can check your State Pension forecast through the GOV.UK website to see what you're entitled to and whether you have gaps in your record.

When planning for retirement, factor in your expected State Pension as one income source alongside your personal savings, workplace pensions, and any other income. The State Pension should be part of your retirement income strategy, not the entirety of it.

What About Inflation?

Inflation is a critical consideration in retirement planning. Even modest inflation (2-3% annually) compounds dramatically over 20-30 years of retirement, significantly reducing purchasing power.

To protect against inflation:

• Invest in assets that historically outpace inflation, like stocks and real estate
• Include inflation assumptions (2-3%) in your retirement planning
• Ensure your withdrawal strategy accounts for inflation adjustments
• Consider inflation-linked investments like Index-Linked Gilts
• Build margin into your plan for higher-than-expected inflation

The State Pension increases annually through the triple lock, providing some inflation protection. However, your personal savings need to generate returns that outpace inflation to maintain your purchasing power throughout retirement.

Should I Use a Financial Advisor?

Whether to use a financial advisor depends on your situation, comfort level, and the complexity of your finances. Consider professional advice if:

• Your finances are complex (multiple income sources, investments, or pensions)
• You're approaching retirement and need help with withdrawal strategies
• You're unsure about investment allocation or risk tolerance
• You want tax planning optimisation
• You don't have the time or interest to manage your own investments

If your situation is straightforward and you're comfortable managing your own finances, you may not need ongoing advice. However, even a one-time consultation as you approach retirement can be valuable for developing a comprehensive strategy.

Summary

Key retirement planning takeaways:

• Start saving as early as possible to maximise compound growth
• Save 15-20% of income, or more if starting late
• Early retirement is possible but requires higher savings rates
• Plan for retirement to last until at least age 90
• Build in safeguards against running out of money
• Balance debt repayment with retirement saving appropriately
• Review your plan annually and when major life events occur
• Use conservative return assumptions (5-7%) for planning
• Factor in the State Pension as one income source among others
• Protect against inflation through appropriate investments
• Consider professional advice for complex situations