Obviously, the earlier you start to save money for retirement, the better. You’ll need to save less if you start whilst you are young. It’s never too late to start saving, but the older you get, the more you’ll have to put into the pot.

Firstly, decide when you are going to retire, if you can afford it, maybe you’ll retire young at something like the age of 55, or maybe you can’t and you know you’ll need to wait until pensionable age. You might even decide that you want to continue to work after you reach retirement, but whatever decision you take, you’ll need to know how much you’ll have to live on, when you do decide to stop working.

Working out what you’ll need

You won’t need as much money when you retire as you do if at the moment you are paying a mortgage, travelling to work and are supporting children. Hopefully by the time you stop working you will have paid off the mortgage and your children will have flown the nest.

You’ll need money to maintain your home, pay living expenses, pursue any hobbies you have and, take holidays. Which? Magazine give two target incomes in their retirement guide, an income of 15,000 a year and one of 30,000 a year. 15,000 is said to cover essentials, so you will need add the costs of holidaying, hobbies or eating out on top of this sum and if you include a car, shopping, and home improvements, the sum will be closer to 30,000.

Do your sums

To help you calculate what you will need, many pension companies have online calculators to help you. Or, you can do it yourself by calculating how much you’ll need to pay the bills (take into account you may be at home more often and therefore heating costs may not drop that much. Make sure you add the money you’ll want for days out, holidays, club memberships, the car if you’re going to continue driving, clothes, haircuts, holidays and birthdays and weddings and christenings.  Don’t forget to add a small percentage for emergencies and then work out the yearly income you’ll need.

Once you have that figure you can take off any state funded pension you’ll receive and any savings you already have. Once you have the yearly figure then it’s time to work out how much you’ll need to save to achieve that sum.

Which? Magazine have come up with four different ages to start saving for a pension, if you want 15,000 a year at retirement and you include your state pension. They say if you start saving at 25, you’ll have to put away 165 pounds a month, at 35 it rises to 215, at 45 you’ll need to save 322 and if you leave saving until you’re 55 you’ll be looking at 644 a month until you get your state pension at age 66.

If you want a pension of 30,000 then you’re looking at saving a lot more. For example, if you start at 25 you’ll have to put away 502 a month to get to this figure and if you leave it until 55 then you’ll have to find 1,962 a month.

Other solutions

If you haven’t been able to save for retirement, but you own your own home you can downsize and use the equity towards your retirement or try an equity release scheme, from a company such as Aviva. You can get more information on equity release from the Daily Telegraph’s Retirement Solutions page. You can also think about letting out a room in your home, which will bring in some extra income.