How much do expats need to save for retirement?

Types of Pension Plans


How much money is needed to pay for a comfortable retirement is the question everyone would like answered. Really, it’s a question without an answer because too many variables apply.

The main problem is that none of us know how long we will live, so have no idea how much cash we need for the future. The estimation is retiring at 65 and living 20 years, according to average life spans and statistical research – some lucky ones may live way beyond 20 years.

Deferring your income until retirement

Other variables come into play as well – for instance, will you need expensive long-term care?

Besides paying the bills, you will also want some holidays and perhaps to spend a little pursuing a hobby. Without an income and with the safety net of the state pension covering the basics, those cash savings must eke out to cover an awful lot. And that’s without replacing the car or spending on emergencies.

Reality dictates a retirement saver can only do the best they can with the financial resources available. Lifestyle also influences saving. Few savers realise soon enough just how much they will need to save for their later years. Pensions are just deferred income you earn during your working life and put aside until later.  If you do not start saving early enough, the cash pile just gets smaller, or you may need to work longer.

What you need to save

The accepted wisdom is retirement income should come to around two-third’s of final salary. Replacing a £60,000 a year salary means finding a retirement income of £40,000, including the £8,300 a year state pension.

Assuming an investment return of a lowly 4% a year, generating the remaining £51,700 means having savings of £1.3 million in a pension – £300,000 more than the lifetime allowance limit allows. Subtract your current savings from that £1.3 million and divide by the number of years between now and your retirement. That’s how much you should save each year.