Rathbones were recently commissioned to look into the financial lives of today’s 25-year-olds. In order to have the retirement they dream of, these young adults will need a staggering pension pot of £3.1 million. This sum is key for the quality of life competition. It enables yearly foreign vacations, short breaks in the UK, restaurant dining and spur of the moment thrilling journeys. This is a staggering increase of £1.5 million that shows just how much the cost of living has increased for those entering retirement.
The state pension now provides people around £1,600 a month. Unfortunately, it is not nearly enough to ensure people can achieve a decent standard of living. To retire in comfort for 25 years, an individual will need at least £1.4 million. The research uncovers that Gen Z will require £2.2 million to enjoy a comfortable lifestyle in retirement. For just their basic living expenses, they’ll need a minimum of £947,700.
Rathbones calculated its estimates using a few guiding assumptions. Pension contributions are scheduled to increase by 2% annually. The pension pot is expected to increase at an average annual rate of 5%. A 2% annual inflation rate is included in these estimates.
Money advisers advise aiming to save three times your salary by age 30. This target is a good start for making sure your pension is there for you in the long run. By the time people get into their 50s, this goal needs to be raised to six times their paycheck. These national benchmarks highlight the need for retirement planning to begin early and be strategically implemented.
“Yes, hello, is that the Bank of Mum and Dad?” – A humorous take reflecting the financial realities many young people face.
As Gen Z members reach retirement age at 65, the difference between what they will need and what they have saved is striking. A comfortable retirement is not just about a nest egg you can buy. Good experiences, like taking leisure trips or eating at restaurants with friends and family.
The results stress that a secure retirement is not something that just happens, nor is it achieved without careful long-term financial planning.
“Some spontaneity” – The retirement living standards