Young adults are on course to retire with just a sixth of the funds they'd hoped to have set aside, a new survey has found.
Those aged 16 to 24 said they would like to retire with an average annual income of £64,000 a year, according to Aegon. But analysis of their saving habits suggested they are more likely to end up with just £11,000 a year.
If a young saver wanted to achieve their ideal income in retirement, they would need to set aside as much as £800 a month from the age of 20. Yet research suggested three fifths (59%) of this age group don't contribute any money to their pension pot at all at present.
Aegon UK Direct MD David Beattie said: "The findings don't paint a pretty picture for the UK's younger savers. Unrealistic expectations both in retirement income and early retirement age mean that this age bracket are set to fall well short of the retirement income they want.
"However, we must remember that younger people have different financial priorities, such as saving for a deposit on a house or paying off student debt, and this can mean putting money aside for a pension doesn't top the list. What this age group has on their side is time, but it is important this doesn't lead to complacency."
Aegon suggested together four tips to help young adults ensure they're prepared for retirement:
- Claim your free money: Firstly, if you're employed, remember there's free money out there. Many employers have a pension scheme into which they contribute money. Many people don't sign up to this, so check with your HR department
- Every little helps: Work out how much you can save each month, regardless of how small that is. Because you're young you have time on your side. £20 a month from the age of 25 could result in a pot of £24,000 by the time you retire, just think how big that pot could be if you could double or triple that contribution.
- Consider the benefit of time: The longer you save for, the more your interest is compounded meaning more money! For example, someone who starts saving £20 a month at 25 could end up with a pension pot £10,000 larger than someone who started saving the same amount at 35, despite only contributing £2,400 more
Set a goal: Most people find it easier to save when they have a goal in mind. Set a savings goal and stick to it. Aegon has launched a site to help you learn more about when you might be able to retire based on your current savings contributions, visit www.retireready.co.uk
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