It is well known that the state, the government, is struggling to provide pensions for the elderly already.
With an ageing population and constant talks of cutting the deficit, it is clear that the young nowadays are likely to get less in real terms than even pensioners today (If they get anything at all).
The table below illustrates what proportion of their income people are likely to have to save in order to retire with a reasonable standard of living.
- Age 25: 10-15%
- Age 30: 12-17%
- Age 35: 15-20%
- Age 40: 17-24%
- Age 45: 23-30%
- Age 50: 32-45%
- Age 55: 50-70%
Most people are shocked when they see this. They realise that they now have to fork out a large proportion of their income to fund their retirement. Those who are 25 now though have the nice situation that they probably only need to think about putting aside 1/10th of their income. With the tax incentives associated with pensions this can be less arduous than it sounds.
Saving, like many things is a habit. The discipline of putting money aside for the future should be started at an early age. Many young people are too focused on life to think about next year, no matter four decades time, but those that do take responsibility early are going to find themselves in a much better position when they are 30, 40 ,50 and ultimately at retirement age.
We understand that for the majority of those at graduate age retirement and pensions are not going to be a major concern for at least a decade. Hopefully the articles below will raise knowledge levels and raise consciousness about the importance of saving early. If just one person reading this makes the decision to save earlier than they would have, then this article will have been worthwhile.
There are several good articles on this site that will help guide you through the jargon and maths of pensions: