Who wants to be a millionaire? You do, if you want to enjoy a comfortable retirement

If you want to maintain a comfortable standard of living into your retirement, you’re going to need to save up around £1 million. Sounds like a tough task? It’s going to be, so we hope you’ve made a start!

A study by consultancy firm Mazars took the opinion of 2,000 UK adult millennials and, along with some insightful accounting, came up with the six-figure sum. Calculations were based on the average wage for this age group, accounting for inflationary increases and career progression, with a target retirement income of around half of their regular wage.

Known as ‘Generation Y’, the millennial generation were found to place much less emphasis on the importance of saving for later life, and around a third of them thought they would have to work past the retirement age to survive financially. More worryingly, around a third of the respondents ‘didn’t know’ what they would live on in retirement, and had no firm plans in regards to saving or paying into a pension anytime soon.

How to save a million

£1 million is a realistic but daunting figure when you consider that the average lifespan is increasing generation by generation. Right now, it’s standing at 81.6 years, but by the time millennials retire, we could be enjoying life expectancies of 85 years or more.

Which? conducted research with their members to find out how much was needed in retirement, and found that households spent an average of £26,000 per year. If you plan to include luxuries like long-haul holidays and new cars, that figure could be closer to £39,000. So how can you save enough to ensure you’ve got enough capital to retire happily?

  1. The earlier the better

The earlier you start saving, the less painful the savings process will be. The beauty of compound investments is that by putting away little bits for a long time, your nest egg will begin to grow exponentially. As a guideline, a 25-year-old could reach £1m by age 65 by saving £506 as a high rate tax payer, or £675 as a basic rate taxpayer each month. Leave it until you’re 45 to start saving, and you’ll need to be putting away between £1,630 and £2,174 a month to reach the £1m goalpost.

  1. Use tax perks to your advantage

Most people are allowed to save up to £40,000 each year into a pension pot and receive a generous amount of tax relief as a perk. Basic rate taxpayers can pay in £80 and make a £100 contribution to their pension, and higher rate tax payers can pay £60 to make the same contribution. This makes pension pots a more tax efficient way of saving than even ISAs and other commonly favoured savings vehicles.

  1. Don’t forget about the state pension

Don’t forget about the good old state pension. Despite the retirement age being raised for some of us recently, it’s still a lucrative source of income and should not be left out of your calculations. You’ll need to have at least 35 years of national insurance contributions under your belt to claim the maximum allowance, but if you have gaps in your record, you can always make payments to fill them in.

  1. Use your workplace pension

Since 2012, all employers have been required to automatically enrol anyone earing over £10,000 a year, into a company pension scheme. They could be paying in just 1 per cent right now, although this will rise to 3 per cent in 2019, but it’s still unlikely to get you close to your target savings goal. Talk to your employer about the benefit package, as many of the schemes offer increased contributions if you pay in too, sometimes matching what you contribute. Make sure you’re making the most of what’s on offer to get good value from the scheme.

  1. Get professional advice

Whether you’re a millennial or are somewhat older, there’s never a bad time to talk about pensions, investments and saving for the future. Millennials, in particular, have a history of being fiercely independent about their finances, with 50 percent preferring to use an app and a large proportion reliant on the internet for advice. Sometimes nothing beats a face to face chat with a professional, so find a friendly financial advisor today who can put you on the right track to meeting your savings goals.

A million pounds might sound like a lot of money now, but start tucking away a few quid on a regular basis, and it will soon be a goal you can actually imagine achieving. Nobody wants to be poor in their old age, so get your calculator out sooner rather than later and start making it happen.