In today’s tough economic climate, many are understandably worried about their future, particularly after they stop working. Recent research has shown that a third of Britons don’t have any pension provisions at all, and are playing a dangerous game that could result in retiring in poverty even after working hard all of their lives.
However, even for those who are saving away diligently in retirement, there is still the nagging question: is it enough? A pension calculator can help you understand how much money you will need to put away each month in order to maintain your ‘dream’ retirement nest egg. However, a pension calculator is generally not suitable for those in the public and private sectors who have defined benefit pension schemes, such as a final salary schemes. These schemes generally guarantee employees a certain percentage of their salary (either their career average or final salary), making a pension calculator unnecessary for those who hold a defined benefit pension.
Calculating your retirement
It’s difficult to understand exactly how much you will need in retirement, especially because of what some critics are calling a ‘post code lottery’ of council-funded healthcare. This is because the threshold for who must pay for their own health care in their old age differs from council to council, making it important for you to know the rules where you live in order to understand how much you will need to save.
Health care is not the only factor that can drastically affect how much you will need to save in retirement, as there are always unforeseen expenses such as emergency car or house repairs that you will need to take into consideration. There is also the question of what you want to do in retirement, as many people would like to spend their golden years traveling and seeing the world but do not have enough money to do so.
This makes planning with a pension calculator extremely important, as making adequate preparations could mean the difference between a dream retirement and a downgrade in living standards.
Pension calculator factors
A pension calculator takes several different factors into account, which means that you will need to gather all the necessary information about your fiscal history before you attempt to use one. Some factors are easy, such as your current age and your current salary, but often a pension calculator will need to take into account how much you have in savings. In addition, you may need to know how much you are already contributing each month, and your desired monthly income in retirement.