If you’re nearing your seventh decade, then you may be wondering how much you should have saved by 60. You might want to know how your savings compare to the average 60-year-old’s and whether you will have enough saved to meet your retirement needs.
In this article, I check out what you should ideally have saved by 60 in your pension scheme and emergency fund. I also look at what you can do if it looks like you might fall short on your savings target.
Saving for a pension
So, how much should you have saved in your pension by the age of 60? Fidelity recommends that savers should aim to have eight times their salary in their pension fund. So, if you earn £25,000 a year, you should aim to have £200,000 in your pension fund by the time you’re 60.
Depending on your provider and your health, by the time you’re 65, a pension pot of £200,000 might provide around £11,000 per year. If you’re also entitled to a full State Pension, you can currently expect to receive just over £9,000 per year. But your State Pension won’t be available until you hit the state pension age, which is currently 66.
You may find it useful to use an online calculator to work out whether your pension savings are on track. You can then take action if you think you might fall short.
Saving for an emergency
As well as a pension, it’s a good idea to have an emergency fund to help with unexpected financial situations. Many experts suggest saving three to six months’ worth of expenses.
You will probably want to hold your emergency fund in an easy access savings account so you can get to your cash quickly if you need it.
How to maximise savings
If you are still working, you may be able to top up your existing savings, especially if you are fortunate enough to have paid off your mortgage.
Here are four steps you can take to top up your savings:
- Set a savings goal. You can use an online pension calculator to work out whether you will hit your target and how much more you need to save.
- Work out a budget. You may be able to add more cash to savings if you cut costs in other areas.
- Join your employer’s pension scheme. Most employers have pension schemes and will often match your contributions. Make sure you join your scheme and check how much you need to contribute to get the maximum from your employer.
- Don’t forget your older pension schemes. You may have pension pots from previous employers that you can add to your pension total. If you’re not sure about the details, you can use the pension tracing service to help you find older schemes.
Other options if your savings still fall short
If you are a long way off your savings target or you are no longer working, you may want to look at other ways to reach your retirement goals. If you have looked at how much you should have saved by 60 and think you might not have enough, then here are some other options to consider:
- Part-time work. Many people decide to carry on working into their 60s and 70s. In fact, the number of people working in their 70s is growing every year. Many employers will consider part-time working, so this may be an option to top up your income.
- Delay taking your pension. Many providers will pay out more if you are older than 65 when you buy an annuity. If you are in a position to carry on working and delay taking your pension, then this may be worth considering.
- Downsize your house. If you own your house, then you may be able to release equity and save on your bills by downsizing to a smaller house. You would need to take into account selling fees and stamp duty as they can often mount up.
- Equity release on your house. This allows you to unlock the value of your house but still live there.
If you’re approaching the big six-oh, then it is a good idea to take professional financal advice on your retirement plans. Everyone has different financial circumstances, and by asking an expert, you can find out what is right for you.