How to make your retirement savings last a lifetime with minimum effort

Here are some tips to help you ensure that your pension savings don’t run out.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Saving for retirement can seem like a daunting process at first, but it really isn’t. As long as you have a regular savings plan in place, make sure you don’t dip into the pot, and invest your money, over time the market will do all of the hard work for you.

For example, if you save £100 a month for 40 years, and achieve an average annual return of 7%, at the end of the period you’ll end up with a final pot of £260,000 — not bad for little to no work.

Starting to save 

The first stage of planning for retirement is to decide how much you want to retire with. You need to ask yourself what sort of quality of life do you want when you retire?

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Most retirees spend approximately £30,000 per annum. This sum, which is just above the average full-time working income of £27,000, requires a total pension pot of around £350,000 or more to be able to be self-sufficient for a 20-year retirement. 

Unfortunately, these figures are a bit unrealistic as they assume a perfect world scenario where the investor can achieve a 9% per annum return on their pension pot during retirement.

If you can achieve a 9% per annum return on your savings, then with a starting pension pot of £355,000 you can make your savings last forever, with no effort. For the past 100 years the leading US index, the S&P 500 has gained around 9% each year, although there have been many peaks and troughs along the way. 

Building the pot

In reality, the returns you’re able to make on your savings are likely to be much lower than the example above because in retirement you will need to take less risk with your money. 

And if you want to be able to retire with a savings pot that has an infinite lifespan, at today’s low-interest rates, you’re going to need to save a lot more before you give up work. 

So, how much is enough? Well, according to my calculations, assuming you require an income of £30,000 annually, retire at 65, live to around 85, and achieve a return on your investments of 4% (a more realistic return in today’s environment, and one that requires almost no effort on your part), you’ll need to start with a savings pot of £550,000.

If you have time on your side, the good news is that reaching this level is not that hard. As you can take more risk when saving up for retirement than you can when actually retired, savings returns will likely be higher. 

According to my figures, if you can achieve an average annual return of 7%, start saving at 26 and retire at 66, you need to save £439 a month to be able to retire with £550,000 giving you £30,000 per annum in retirement. All of these figures exclude inflation.

The bottom line 

If you want to make your pension savings last a lifetime with little effort, you need to enter retirement with a pension pot with £550,00 rather than that £350,000 figure. With this savings reserve, you should be able to generate a steady income from a mix of bonds and shares that will last a lifetime. But remember to start as soon as possible. The monthly savings figures quoted here will rise for every year you delay.

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Just released: our 3 top small-cap stocks to consider buying in April [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

Here’s why Tesla stock just rocketed 22.7%! Is it time to buy?

This writer wonders whether the news that sent Tesla stock soaring yesterday is a true gamechanger for the electric vehicle…

Read more »

Investing Articles

2 quality UK stocks to consider buying as share prices rally

With UK stocks moving higher, it might look as though investors with cash on hand have missed their chance. But…

Read more »

Investing Articles

How much £10,000 invested in Lloyds shares is forecast to be worth in 12 months

Harvey Jones is looking past today's stock market volatility to see where Lloyds shares may stand in a year's time.…

Read more »

Investing Articles

How Warren Buffett stays ahead of the stock market

When share prices fall, everyone suddenly wants to be like Warren Buffett. But what’s the secret to the Berkshire Hathaway…

Read more »

Investing Articles

Cheap UK dividend shares to consider buying right now

We're only just past the first quarter of 2025, but it already looks like the year could be another good…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

What the heck is going on with the Barclays share price now?

The Barclays share price surged 25% as the market open on 10 April. Once again, the volatility’s been driven by…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

What the devil’s going on with the HSBC share price?

The HSBC share price has actually been less volatile than some of its peers, despite its Chinese operations suggesting it’s…

Read more »