Neil Faulkner explains why young people's retirement income expectations are flawed.
Despite working hard all their lives, retirees have been constantly disappointed with their retirement incomes.
Yet, according to a recent survey by fund manager BlackRock, around a third of people in their mid-twenties to mid-thirties think they'll have £30,000 a year to live on when they retire.
This cannot be realistic, because it's about as much as the average earnings of someone still working full-time.
The harsh reality is that if you're 30 years old and want to retire aged 68, you'll need to save around £500,000 to receive £30,000 annual retirement income.
This includes the state pension, which I've assumed will be around £7,000 a year.
Also, you're allowed to take an up-front, tax-free lump sum of up to 25 per cent of your personal pension pot and I've assumed you'll take advantage of this.
So you'll receive a £125,000 cash lump sum on top of your £30,000 annual retirement income.
But to save and grow a pension pot of £500,000 by age 68, a 30-year old would need to save between £420 and £530 a month.
Now, the government will contribute to your monthly pension payments by crediting back some of your income tax, usually matching each £1 you pay with an extra 20p if you're a basic-rate taxpayer.
So this is an added bonus. But this tax relief will probably be necessary to achieve a half-million pound pension pot.
But this level of monthly saving, even with the tax relief, is a tall order for most 30-year-olds.
The good news
Despite this, it's still not as bad as you might think.
When we retire, not only do we have lower incomes than we hoped, we usually have far lower outgoings.
And assuming we don't go into a care home, the costs decrease further as we become less active.
I estimate that I could live pretty comfortably when I retire on around £16,000 a year, including the state pension.
If I was 30 and starting to save now, I might only need to put away around £200 a month to achieve a pension pot of around £200,000 in today's money.
How much do you need to live on?
I have seen retirees who live happily on less than £10,000 a year and others who need an annual income of more than £20,000 to pay for their bills and other outgoings.
Do an estimate for yourself, and don't forget to account for the fact that may need to pay income tax on your pension income.
You can visit the government website Gov.uk for more information on planning your retirement income.
This handy resource also includes a "Future Wallet" to help you work out how much money you'll need to live on when you retire.