According to the Scottish Widows Retirement Report individuals should be saving 12%1 of their salary to achieve a comfortable retirement. But with the average UK house price going up by 7.1%2 each year and the average British wedding totalling £20,5003 is it possible to save 12% and reach your lifetime goals?
What savings do you need?
The average Brit thinks they will need £23,4691 a year to feel comfortable in retirement. In order to achieve that you would need a pension pot of £330,0001.
The average UK property costs £191,8122 and the average deposit is currently 17%4 which means you would need a deposit of around £33,000.
If you add this to the cost of a wedding you currently need to save £383,500 over your lifetime (assuming you only get married once).
On top of this, it is recommended you have 3 months’ salary in reserve. Looking at the average UK salary, that is just under £7,0005.
To be on the safe side round that number up to £400,000.
Achieving you savings goals
The average interest rate on a cash account is currently 0.9%, that is providing you have not left that in your 0% current account. Cash savings are currently costing UK savers £4.1billion a year as inflation erodes the value of their money.
The value of investments can go up or down so many deem this to be risky. But when looking at long-term savings past trends indicate that this could be a good way to protect your money. Whilst past performance should never be used to predict the future, projected returns of around 4.7%6 make it a lot easier to build that £400,000 pot.
Is it achievable?
When considering your long-term savings, you can afford to take more risk as the time frame is extended. If you were to open a ‘bold’ investment account for 35 years you would have that £400,000 if you invested just £80,000. This is a projection and is not a predictor of performance but all of a sudden a pot of £400,000 seems just a little closer.
1 Scottish Widows Retirement Report, 2015
2 Land Registry, House Price Index, January 2016
3 BBC News, March 2016
5 Metro, November 2015