How do you envisage your twilight years? Many view it as an opportunity to do things that they were held back from in the past like travelling to far-flung places and pursuing passions.
However, doing things like that depends on you having made a detailed retirement plan in earlier life. Worryingly, more than one in five Brits over the age of 55 do not have any savings for retirement.
Auto-enrolment for workplace pensions can help to bridge that gap for many people currently in employment in the UK. However, in order to have a robust retirement plan in place, it’s best to start thinking about it way ahead of time.
5 Steps To Retirement Planning
1. Envision Your Ideal Retirement
- Lifestyle: Picture your perfect day! Active adventures, leisurely pursuits, or volunteering? Understanding what you want from later life is the crucial first step in setting goals to achieve them.
- Location: City lights, rural charm, or somewhere in between? Will you be looking to downsize your house, or do you want to stay where you are?
- Timeline: Are you happy with your state retirement age or do you want to bring things forward? This might influence your appetite for risk in when selecting investment options.
2. Crunch the Numbers
- Estimate Expenses: Consider your State Pension entitlement, and balance it against expenses like your utilities, Council Tax and TV Licence. Add travel, hobbies, and other desired spending.
- Calculate Income Sources: Include State Pensions, workplace pensions and projected investment returns. Research your State Pension amount using the government website.
- Identify Funding Gap: Subtract your income from those expenses to determine how much you need to save in order to achieve your desired lifestyle.
3. Craft a Personalised Savings Plan
- Maximise Workplace Pensions: Contribute at least enough to get employer matching (typically 3-5%). Use government schemes like NEST if you’re self-employed.
- Open Personal Pensions (PPPs): Choose between Self Invested Personal Pensions (SIPPs) for more control or stakeholder/standard PPPs for simpler options.
- Consider Additional Investment Strategies: Explore investment options like Individual Savings Accounts (ISAs) and Investment Trusts.
4. Seek Professional Guidance
- Financial Planner: A certified professional can provide personalised advice and create a comprehensive retirement plan based on your unique goals and circumstances.
- Investment Advisor: If navigating investments feels overwhelming, consider seeking guidance from a professional who aligns with your investment philosophy.
Remember if you lose out after taking advice from a qualified advisor, you may be eligible to make a professional negligence claim.
5. Continuously Monitor and Adapt
Reassess your plan every year or two, adjusting for changes in income, expenses, or life goals. Keep up with economic trends, tax laws, and investment changes that might impact your plan.
Remember, life throws curveballs. Be prepared to adjust your savings, investments, or even retirement date as needed.
