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Don’t rely on the State Pension! Here’s how to turn £100 a month into £108,020

So how much do you invest towards your future every month? Is it £50? £100? £150? That’s better than nothing, but if you want a really comfortable retirement, you may have to invest a lot more than that.

Be an early bird

My colleague Roland Head has set out how much you need to save at different ages and his figures suggest that if you want to retire with £500,000 in your pension pot, you will need to save £285 a month if you start from scratch at age 30, rising to £627 at age 40.

Double these figures if you want to hit £1m which is the target that Roland set in his article. Whatever your goal, the earlier you start, the better.

Do this one thing

There is something else you must do. This applies to almost everybody, regardless of how much you have in your pot, or how long you have until retirement.

And that’s to take a ‘stepping stone’ investment approach.

Which is what exactly?

It is the phrase that mutual Scottish Friendly has coined to sit alongside new research showing the vital importance of regularly stepping up the amount you pay into your pension, Stocks and Shares ISAs or any other investment vehicle.

Investors who increase the amount they put away by, say, 10% every year will take their nest egg to the next level

Basic mathematics

Somebody who invested £100 a month over 20 years and never increased their contribution would put away £24,000 in total and end up with £43,370 after fees, assuming average investment growth of 7% a year.

However, if they increased their monthly contributions by 10% every year, paying in £110 a month in year two, £121 a month in year three and so on, they would have £108,020 after fees. This would hand them an extra £64,650 to see them through their later years.

Starting small

Scottish Friendly’s saving specialist Kevin Brown says this approach is particularly important for those who cannot afford to invest much at the moment, for example, those just starting to invest or on lower salaries, particularly if young or new to the workplace.

Someone who invested £10 a month into the FTSE All Share 20 years ago and kept their monthly contribution the same for the whole period would have £4,338 today after fees, but £10,802 if they increased their monthly contribution by 10% every year.

Yes, you will have paid more in (£68,730 against £24,000), but the point is that the increases are gradual, and most people therefore won’t miss the extra money they are setting aside for their future.

Take the next step

Brown says too many people think you need to invest lots of money to generate good returns, but “even if you start small and gradually increase the amount you save or invest over time, you could be left with a sizeable pot.”

This works particularly well when investing for your future in a tax-free Stocks and Shares ISA, and you can find a choice of some of the best platforms here.

The stepping stone approach can work just as well for experienced investors. It’s time for all of us to step up.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.