Welcome to the final guide in this series of six. These guides set out everything you should consider as you set up your savings and make investments for the future â and, most importantly, how to take action today.
In case you missed them, check out:
Part one:Â Investment wrappers
Part two:Â How much to invest
Part three:Â Saving, investing, or trading?
Part four:Â Rebalancing your portfolio
Part five:Â Choosing a provider
1. Future You đ”
1:54 min read
Retirement can seem like a long way off: the sort of thing only someone a lot older (and a bit grayer đŽđ») needs to think about. Pensions, annuities, defined contributions â surely you can get away with leaving those till youâre in your 60s, right? Oh, the innocence of youth…
Act now to save later
While it may be decades away, planning for retirement while youâre still young is crucial â and future you will be very grateful.
Thatâs because setting yourself up for a financially secure retirement is a much bigger endeavor than you might imagine. Bumbling around in the south of France and writing your memoirs costs money, after all â and then thereâs the grandkidsâ birthdays to consider. Without a regular paycheck coming in anymore, youâll instead need a bunch of cash saved up to fund your well-earned relaxation đ
Those retirement savings donât just appear out of thin air: youâve got to build them over time. And as weâll explore in this guide, the earlier you start saving for retirement, the better. Weâll also look at how you can play it smart by taking advantage of tax-reducing initiatives like pensions. Maximizing your returns means more Malbec â and fewer migraines.
Overcoming uncertainty
Obviously you canât know exactly what your retirement will look like. But we do know two things: itâs fairly likely that youâll live into your seventies, and itâs fairly likely that youâll want to quit working before you die. Sure, plenty of things may change between now and then â and that billion-dollar idea youâre sitting on might end up making your pension pot look like pocket change. But putting some cash aside for tomorrow today is only prudent. It may involve making a couple of small sacrifices â but planning for retirement now will make future you much, much better off in the long run đ
With that in mind, itâs worth working on the assumption that your career will follow its current trajectory â and taking any unexpected events as they come.
To kick us off, then: how do you figure out how much youâll need to retire?
Note: this guide contains some specific tips for UK readers â but itâs still worth reading wherever you are.
2. Dentures And Debentures
2:37 min read

How much will I need to retire?
As with so many financial questions⊠it depends. First, youâve got to figure out how much youâll be spending each year. From there, you can work backwards to calculate how much youâll need to have saved up â and therefore how much you should start saving now âïž
A good rule of thumb is that to maintain the same lifestyle you had when you were working, your annual retirement income should be two thirds of your pre-retirement income. Thatâs on the assumption that youâll need less money than when you were working because you wonât have a mortgage or rental costs â if you still have those, youâll probably need more.
The government can help⊠a bit
If youâve worked for long enough, you may be eligible for a state pension â in the UK, thatâs currently around ÂŁ9,000 a year after 35 years of National Insurance payments. That reduces the amount youâll need to provide yourself, but you wonât be able to claim it until you reach the state pension age. In the UK, thatâs currently 68 â but it might be higher by the time you get there.
The state pension is also unlikely to be enough to support you fully. The average UK salary is around £29,000. Two thirds of that is ÂŁ19,000, and subtracting the full state pension still leaves you with a ÂŁ10,000 annual shortfall đŹ
Of course, if you want to enjoy a lavish life when youâre older, youâll need a bigger pot. If youâre planning on regular trips abroad and a new car here and there, consumer group Which? says youâd need a pot of ÂŁ33,000. In reality, the median disposable UK retirement income is ÂŁ23,888. But for simplicityâs sake, weâll stick with that ÂŁ10,000 a year figure as a target for now.
The 25x rule
So how much do you need saved? You know the score by now: it depends! Specifically, it depends on how long you think your retirementâs going to be. If you want to wave goodbye to work at an early age and want your cash to last comfortably (as well as have some left to pass onto your loved ones once youâre gone), the general rule is to multiply your needed income by 25 to find the required size of your pot â ÂŁ250,000 in our case.
As long as you live within your means, your portfolio should always be generating more returns than the amount youâre withdrawing, so you shouldnât be at risk of running out. But as with anything involving the markets, itâs still worth remembering that it carries some risk. When markets collapsed in the last financial crisis, for example, some suddenly found themselves with a much more limited retirement than theyâd hoped. Instead, you might want to sacrifice the hope of endless returns in exchange for a guaranteed-income âannuityâ. The costs for those vary â more on all that later.
Either way, youâre going to need quite a lot saved up. Fortunately, however, amassing a big pile of cash isnât as hard as it seemsâŠ
3. Money Makes Money
2:02 min read

The magic of compounding
Saving ÂŁ250,000 might seem impossible. Letâs say youâre 30, and want to retire at 65: youâd have to save more than ÂŁ7,000 a year to amass your sum in time. But thereâs a way to reduce those annual payments: investing.
Itâs all down to one of the most powerful forces in finance: compounding. If you had ÂŁ7,000 and invested it at a 3% annual rate of return, youâd end up with ÂŁ7,210. The following year, youâd make ÂŁ216 â ÂŁ6 more than the year before. Thatâs because the ÂŁ210 you earned the first year starts generating its own returns đ

And while ÂŁ6 might not seem like much of a difference, over time your returns will grow exponentially. After 35 years, that ÂŁ7,000 will grow to almost ÂŁ20,000 â and thatâs without you saving any more. If you contribute regularly, a ÂŁ350 payment each month will get you to ÂŁ250,000 in the same time. And 3% is a pretty conservative return â if you get 5%, youâll need less than ÂŁ250 a month. Of course, thereâll inevitably be more risk involved there.
How else can I reduce my monthly contributions?
The earlier you start saving, the more your savings can compound â and the better off youâll be. If you started saving at 20, saving ÂŁ225 a month at a 3% return would have you sitting on ÂŁ250,000 at 65.
Those payments are still high, of course â most 20-somethings donât have enough disposable income for it to be sustainable, and while youâre young you might want to spend more (to travel while youâre fit and mobile, for example). But donât worry: you can always start small, and simply save more as you earn more. Just remember that the more you save while youâre young, the better off youâll be at retirement.
Setting this money aside can be tricky, but budgeting can help you get ahead. Tot up your essential monthly outgoings, set aside some cash for general costs, and decide how much of what youâve got left over to save each month. Itâs best to set up automatic payments to move those savings into a dedicated retirement account as soon as you get paid each month â then you wonât be tempted to dip into it.
Speaking of which⊠you almost certainly shouldnât be building your retirement pot in a normal bank account. Thereâs a special product for you instead: itâs time to show you the pensionerâs secret.
4. Pension Picking
3:20 min read

What is a pension?
Pensions are a type of investment account that offer a whole bunch of attractive benefits, all designed to encourage people to save for retirement.
For a start, you get UK tax relief on pension contributions â the government effectively tops up your pension with the amount you would have paid in income tax on that sum (the exact mechanics of this depend on the type of pension you have, and thereâs a ÂŁ40,000 annual limit on tax-free contributions). If youâre a basic rate taxpayer and put ÂŁ200 in your pension each month, youâll essentially get ÂŁ40 free cash from the taxman đžÂ
You also get tax relief when you withdraw from your pension: once you retire, you can usually draw down 25% of your pension tax-free (again, thereâs a maximum limit on this). Thereâs a tradeoff though: if you want to access the cash before youâre 55, youâll have to pay huge fees and taxes, except in certain cases where your life expectancy is significantly reduced.
How do pensions work?
There are lots of different types of pensions, and each works a bit differently. As we looked at earlier, the government provides a state pension, paid as a monthly sum once youâve retired. The amount you get depends on how much National Insurance youâve paid throughout your working life. But even if youâre getting the full whack, this probably wonât make up the majority of your retirement income đ€
If you work in the public sector or for some large companies, you might have a defined benefit pension: one that guarantees you a certain level of income throughout your retirement. For example, it might guarantee that you get your final salary (or a percentage of it) every year for the rest of your life. If youâve got one of these, you wonât have much involvement with it â other than taking the payments once you retire.
More common is a defined contribution pension. This might be set up by your employer, or by you privately (if youâre self-employed, for example). With these, you contribute each month while youâre working, and can then access whateverâs accumulated when you retire. Youâll have the ability to influence how that cash provides you with a retirement income â more on that shortly.Â
Itâs worth noting that, if youâre enrolled in a defined contribution workplace pension scheme (and if youâre over 22 and in full-time employment, your employer legally has to give you one), your employer will also contribute to your pension pot â basically giving you a delayed bonus. Many employers will offer to match your contributions up to a certain level, and itâs almost always worth maxing this out. After all, itâs free money⊠đ€
Do these pensions stay as cash?
Not normally â instead the money is invested by a pension fund manager in order to generate returns and build your wealth over time. Most pension providers will offer you a range of portfolios to choose from. As with all investing, you should be smart about how you invest: have a diversified portfolio and adjust your risk to what you can stomach. If youâre young, it probably makes sense to go for the highest-risk (and highest-reward) option: many pensions will automatically rebalance your portfolio as time goes on, shifting you into less risky assets as you near retirement so your potâs more secure when you need it.
Unlike with other investments, you might not have a ton of control over where your pension is invested beyond that: choosing individual stocks usually isnât allowed. If youâre adamant on picking exactly whatâs in your portfolio, youâll need a Self-Invested Personal Pension (SIPP), which lets you fully manage your own fund. But with great power⊠đ·
Pay into your pension sensibly, and future you should hopefully retire with a nice chunk of change. Then all thatâs left is to figure out what to do with itâŠ
5. Forever Income
1:45 min read

How do I guarantee a regular retirement income?
If your pensionâs big enough and itâs invested in a safe portfolio of stocks and bonds, you should be able to draw down a small amount each year without running out of cash. But youâre betting on the stability of markets here: thereâs a chance you could run out, and if you do and canât get a job (the robots most likely having taken over at McDonaldâs by then), you could find yourself in big trouble đ€
Fortunately, youâve got another option. An annuity is a financial product designed to keep people secure in their retirement. If you buy one up front, youâll be paid a regular income â and depending on the type of annuity you choose, you might have that income guaranteed forever. The amount youâll get varies, and might be very different when you retire to now â right now, a 65-year-old can get around 5% of the annuityâs value in income each year. That means to guarantee ÂŁ10,000 a year until you die, an annuity costs just over ÂŁ200,000. If you want extra bonuses like an income that increases with inflation, or guaranteed payments to your partner or kids even after you die, itâll cost you more.
Sit back and relax
You could also try setting yourself up with a âpassive incomeâ â money that comes your way without you working. An investment portfolio with high dividend payments is one option, and another popular approach is buy-to-let property. Thatâs where you become a professional landlord, living off the rental payments from your real estate empire. But there are risks involved: the properties could remain unlet for long periods of time, and your income might end up being lower than you expected đ
Bear in mind, too, that just because youâre old you wonât escape tax completely. A combination of state and private pension income, even without any passive cash coming in, will likely push you above the âpersonal allowanceâ threshold. So you may need to plan ahead â and adjust your retirement plan accordingly.
6. Futureproof
1:16 min read

In part one of this guide to figuring out your future finances, we looked at how to protect the value of your money from inflation in a tax-efficient yet accessible way. Boring but important.
In part two, we explored what to tick off before investing, how to work out how much youâve got, and whether itâs better to invest all at once or over time.
In part three, we laid out the differences between saving, investing, and trading, and how you can use all three when putting your money to work.
In part four, we walked you through how to build â and maintain â a diverse portfolio, and what success might look like.
In part five, we helped you find a provider â making sure youâre safe, from fees to guarantees.
And in this final installment, weâve explored how to set yourself up for a long, financially healthy future, from setting up a pension to sorting out your retirement income.
Retirement, just like the rest of life, is no sure thing. But by preparing now, you can give future you the best chance of a post-work world filled with fine chateaux â not financial woe. And ultimately, thatâs what moneyâs all about: allowing you to minimize uncertainty and stress and focus on living your life, whatever stage of it youâre at.
So congratulations on taking the time to educate yourself on improving your future finances, and good luck â weâre sure youâve got an exciting few years in store.