How to save for retirement?

At some point in our lives, we all have been concerned for our retirement and how will we manage our expenses. Most people imagine living a peaceful life after retirement because of the presumption that there will be a lot savings in their bank accounts. While the average age for retirement in Pakistan is 60-65 years, many people start planning for their retirement early i.e. from the beginning or mid of their careers.

It might now be easy to save in Pakistan because of the volatility in the economy but there are many schemes and retirement plans that offer to make a secure future investment with income-adjusted installments. The real question to address is ‘what fraction of income must be put aside so that a sufficient amount is accumulated near to the retirement age?’. Here are some of the ways to calculate this fraction.

1. Create saving Benchmarks

One way of saving is to create benchmarks that must be achieved by a certain age. Experts say that by the age of 30 years, you should have saved up to 50% of your annual salary. Other saving benchmarks can include two times of your annual salary by age 40 etc. These benchmarks can vary and can be changed as per your own needs, income and expenses.

For example, if you are earning Rs. 1,200,000 a year then you may set the following as your saving targets.


Age Target Saving % Target saving for an annual income of Rs. 1,200,000
27 years 20% of your annual income Rs. 240,000
30 years 50% of your annual income Rs. 600,000
35 years Twice of your annual income Rs. 2,400,000
45 years Thrice of your annual income Rs. 3,600,000
50- 55 years Five times of your annual income Rs. 6,000,000

2. Keep a retirement income ratio of 0.8:1

Ideally, the percentage recommended for the retirement income is 80% of your current income. This will ensure that you are able to maintain and continue the same level of lifestyle as per your pre-retirement period. So, if you are earning Rs. 80,000 per month as of now then you should plan your retirement savings, bearing in mind that you will need a monthly income of Rs. 64,000.

3. Divide your required retirement income by 4%

This formula helps you to work-out your own retirement income first and then divide it by 4% to get an idea of how much you should save in total for the same lifestyle. The percentage ‘4%’ is a calculated figure as per historical evidence.

For example, if you decide that you need Rs. 60,000 after retirement to meet your expenses then actually you must save Rs. 60,000/4%= 1,500,000 in total for it.

4. Trust your saving capacity

As per the statistics, Pakistanis have the capacity to save up to 14% of their income. If you are an average income earner with a monthly salary of Rs. 50,000 then saving of even 10% would mean Rs. 5,000 monthly and around Rs 1,800,000 in just 3 years!


Whatever may be the way chosen for retirement saving, Pakistanis have a lot of potential to be able to increase their savings at different stages of their career cycle. Especially by moving onto jobs offering higher income and greater bonuses. Also, one may invest in financial markets such as stocks or mutual funds to increase the value of their existing savings overtime.