Why Plan for Retirement Now?
The most powerful force in retirement planning is time. £500/month invested at 7% from age 25 grows to £1.3 million by 65. Start at 35 and it’s only £610,000. Every decade of delay roughly halves your outcome.
Step 1: Know Your Retirement Number
A widely used rule is the 25x Rule: multiply your expected annual retirement expenses by 25. This gives you the pot needed to withdraw 4% per year indefinitely (the “4% Rule”).
Example: if you need £30,000/year in retirement, you need £750,000 saved.
Step 2: Understand Your Accounts
UK
- Workplace pension — Your employer must contribute. At minimum, contribute enough to get the full employer match.
- SIPP (Self-Invested Personal Pension) — For self-employed or those wanting more control.
- Stocks & Shares ISA — Tax-free growth and withdrawals. No tax relief on contributions but no tax on withdrawal either.
- State Pension — Currently ~£11,502/year (2024/25) after 35 qualifying NI years.
US
- 401(k) — Employer-sponsored. Contributes pre-tax. Always contribute at least enough for the full employer match.
- Roth IRA — After-tax contributions, tax-free withdrawals. Max: $7,000/year (2024).
- Traditional IRA — Pre-tax contributions, taxed on withdrawal. Max: $7,000/year (2024).
Step 3: Determine How Much to Save
A common starting rule: save 15% of gross income for retirement (including employer contributions). Use our Retirement Savings Calculator for a personalised figure.
Step 4: Choose Your Investment Strategy
Inside your pension or ISA, choose investments based on your time horizon:
- 30+ years to retirement — 80–100% equities (stocks/index funds)
- 15–30 years — 60–80% equities, rest in bonds
- Under 15 years — Gradually shift to more conservative allocation
Low-cost index funds (e.g. Vanguard, iShares) are recommended for most investors.
Step 5: Review Annually
Check your progress once a year. Increase contributions whenever you get a pay rise. Adjust allocation as you get closer to retirement.