Here’s a big question: have you ever imagined what you want your golden years to look like? An even bigger question: have you figured out what it will take to make that retirement fantasy a reality?

If the answer is ‘er… no’, then you’re not alone. A lot of us haven’t given much thought to how we’re going to fund ourselves when we stop working. After all, we’ve got bills, babies and busy schedules to worry about in the here and now.

But even if retirement feels a long way off, your future self will thank you for putting thought into it now. Because the simple truth is that the longer you leave it, the less time the money you invest has to work to make sure those later life dreams don’t stay… dreams.

You may have heard of a distant spectre haunting our rosy futures: the pension gap.

It’s a shortfall in pensions savings affecting hundreds of millions all over Europe – a widening gap between what people can expect to get from their state, company and private pensions, and the amount they’re likely to need for an ‘adequate’ standard of living when they retire.

And ‘adequate’ doesn’t mean anything lavish – it’s just having enough to maintain a similar standard of living to the one you have now.

To put it into perspective, a 20-year-old in Germany would typically need to save an extra €2,300 a year to plug their pension gap. That compares to €1,200 in France and €2,700 in Spain.

And – of course – the later you start saving, the bigger the gap you need to fill. So a 40-year-old in Spain will typically need to save €4,400 a year to plug their pension gap, rising to €5,800 a year in Germany.

In short, there’s never been a better time to start building retirement savings so you have a chance to plug that gap.

Working out how much you’re going to need in retirement isn’t as complicated as you might think. And knowing the right questions to ask is half the battle. So here’s what you need to consider.

Start by considering how much you’re likely to spend on things like a mortgage, rent, utility bills and food.

The good news: your day-to-day spending is likely to be lower when you stop work, as you won’t have to pay for things like the dreaded commute or expensive cafeteria lunches.

The less good news: you’d be wise to factor in future outgoings you don’t have now, like long term healthcare or helping to support younger relatives.

It might be hard to picture your lifestyle far in the future (who knows, maybe you’ll have developed an expensive penchant for lawn bowls…), but as a rule of thumb, most of us need between half and two-thirds of our working-age income when we retire.

Much as you might like to quit work tomorrow, in reality you’ll probably retire when you’re in your late 60s. With longer life expectancies thanks to improvements in medicine and rising standards of living, that means you could be spending upwards of 20 years being retired.

It might seem obvious, but always overestimate rather than underestimate – that way you’ll reduce the risk of running out of money.

Much as you might like to quit work tomorrow, in reality you’ll probably retire when you’re in your late 60s. With longer life expectancies thanks to improvements in medicine and rising standards of living, that means you could be spending upwards of 20 years being retired.
It might seem obvious, but always overestimate rather than underestimate – that way you’ll reduce the risk of running out of money.

3. How much state support can you expect?
The amount you’ll need to put away for retirement depends on what sort of state pension you’ll get.

If you live in the Netherlands, Turkey or Croatia, you’re in luck! Pensioners in these countries currently receive more than 100% of their working wage when they retire (think of the lawn bowls!)

Not so lucky if you live in the UK where you get just 29% of a working wage when you hang up your boots…

OK, technically not a question – but a key point all the same. Thanks to inflation and the rising cost of living, your expenses are likely to look steeper in a few decades’ time. As a rough guide, factor in a 3% rise in your living costs year-on-year. 

And remember, if your retirement savings are growing at a slower rate than inflation, then your money’s buying power is shrinking not growing.

There’s never a better time than the present to turn thinking into action. By getting your plans into shape now, you can start preparing for the kind of golden years you want to look forward to.