Take control of your retirement now
Start preparing for the future you want
When it comes to your retirement, you’ll no doubt want it to be a long and healthy one. And this isn’t an unrealistic goal to have. Not in today’s world.
As more people are living longer, there’s a chance your retirement could last 30 years – or more. Sounds great, doesn’t it? But equally, the prospect of living longer does mean one thing: your retirement income may have to stretch even further. And last as long as you do.
That’s why it’s important to plan well – as soon as you can.
Planning for a more confident retirement
Of course, rising life expectancy isn’t the only thing to bear in mind when preparing for retirement. There are other key considerations.
The first is long term care costs.
Not the nicest topic to think about – and hopefully you’ll lead a healthy retirement.
Still, it’s important to think about these types of costs in your retirement plans – should you or a loved one ever need care in the future. Especially because they can be very expensive.
Second, the rising cost of living (inflation).
Over time, the cost of everyday items climbs – and products and services you buy today will most likely cost more in years to come. For example, in 1980, a loaf of bread cost an average of 34 pence. Now, the price of a loaf is over £1.00**.
So, if you were to save your money under your mattress, its value would probably be worth much less when you come to retire. Simply because it’s buying power will be less.
That’s why it’s worth considering keeping your retirement savings in a suitable place – such as a pension or investment – where they have more chance to grow in real terms, over a long period. Providing you’re comfortable with the potential risks involved.
Third, pension freedoms
Introduced in 2015, the pension freedoms offer more flexibility when using your defined contributions pension.
You can withdraw how much money you want – whenever you want (currently from 55 years old). This sounds great. But it also means you have more chance to use your savings too quickly.
It’s important to remember that, while you can withdraw the first 25% of your defined contributions pension pot tax free, the rest will be taxed as income. This could eat into your pot if you take too much, too soon.
Can you rely on the state pension alone?
The state pension, if you qualify for it, is no doubt a useful income boost for anyone in retirement.
Yet completely relying on this is unlikely to help you lead a comfortable lifestyle once you’re retired.
Currently, the state pension for each person is £9,339.2 a year. This can cover the basics in retirement – but is considered significantly below the average retirement income to help you lead a decent standard of living.
To live a financially comfortable retired lifestyle, Which? research suggests both you and your spouse would need a combined income of £25,000 a year. For basic expenses, as well as European holidays, hobbies and eating out^.
For a more luxurious retirement, £40,000 a year (per couple) would help enjoy long haul trips and a new car every five years.
Take control of your retirement. Plan now
Retirement is a time when you should be enjoying life. Not worrying about your finances.
As you’re edging closer to this life stage, now is an important time to check over your plans. And check you’re financially prepared for the retirement you want.
Figures from the Office for Budget Responsibility show £180bn is estimated to be saved by the summer (since the start of the pandemic). If you’ve been in a position to save more money, it’s worth thinking about how you could put it to good use to support your retirement plans.
We’ve teamed with Skipton to help.
If you’re looking for help planning your retirement, a Skipton advisor could review your plans. And help you work out how much income you’ll need to achieve your goals.
A pension is a long-term investment and your Capital is at Risk. Your fund value will fluctuate and can go down. You could get back less than you paid in. Your eventual income will depend upon the size of the fund at retirement, future interest rates & tax legislation.
**National Office of Statistics, February 2021
^Which? November 2020
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