Skip to main content
Why retirement planning is important
According to the Office for National Statistics, the average 65-year-old male can expect to live a further 18.5 years to age 83, and the average 65-year-old female can expect to live a further 21 years to age 86. That being said, this average 65-year-old man will have a 1 in 10 chance of reaching age 96, and this average 65-year-old woman will have a 1 in 10 chance of reaching 98.
Most people spend a lot of time during their working life dreaming of what they would like to do in retirement, the holidays, and trips they will go on and the free time they will have to spend with friends and family. While it is impossible to know what your future might hold, having a plan in place will help you understand what you can achieve in retirement, or can help to point out actions to take now in order to achieve these goals.
Arrange your free initial consultation
What is a retirement plan?
A retirement plan can take many shapes or forms. The plan looks at your situation today and projects this into the future. The earlier you start a plan, the better, and there are many ways to build a retirement plan.
Over your working life, you save towards your retirement, but without a plan in place, it is difficult to know whether you have saved enough.
A plan will help you set your goals for retirement, and outline whether these can be achieved or not. That once in a lifetime, round the world trip may seem out of reach now, but by putting everything down on paper, you can then visualise if it is possible.
How to plan for retirement?
As mentioned, the earlier you plan for retirement, the better, as this can help to establish what you can do between now and your desired retirement age to help meet your goals.
Writing down what you have is the best place to start. A retirement plan should include everything you own, your property, any cash, investments and of course your pensions. You should also take into account any income you have, including benefits, rental income, salary or self-employed income. Factor in any mortgages or debts, and these will either have to be repaid over time, or at the end of a fixed term, which can often be in line with your retirement age.
Thinking about when you’d like to retire is the next step and trying to be realistic with this is very important. Under the current law, the State Pension age is 66, but this is gradually increasing to 67 between 2026 to 2028 and then another gradual rise to 68 between 2044 and 2046. The State Pension can provide a good level of guaranteed income from this age, and therefore can form a good base to start your plan.
How much do you need to retire?
How much you need to retire depends on what you want to do in retirement. By starting to think about what you want to achieve and outlining how much this will cost will help to form the base of the plan.
Having a budget planner of what you need for essentials such as heating, eating and running your home will also help you to know what your base line costs are. You may have costs now, that will come to an end at retirement, for example, you may be paying a mortgage, which is due to come to an end in line with your retirement.
By knowing how much you need for your essential spending costs each year, it is then easier to start building your plan around these. You will then also be able to see how much you have over and above this for the fun things in life.
The average income for a retired couple starts at £19,900 and rises to £54,500 using data from by Retirement Living Standards. If you are unsure where to start when thinking of how much you need to live on during your retirement, it would be worth reading in more detail our article ‘what is the average retirement income’ to see what this could mean for you.
Is a pension a retirement plan?
A pension is the traditional way of saving for retirement and can form a big part of your overall retirement plan. In 2015, Pension Freedoms changed the way you can draw on your pension, and it is important to know whether your schemes have adopted these rules.
Once you retire, you move from ‘accumulating’ or saving wealth into ‘decumulating’ your wealth, where you start to spend your assets to maintain your lifestyle. It is therefore important to consider all of your assets.
Everything can be part of your retirement plan, including your pension, investments and even your property if you intend to downsize in the future. By making a plan, you will be more aware of whether this is something you want to do, or something you need to do in the future.
By planning ahead, you can also make good decisions, and have the correct structures in place so that you can live the life you want to, rather than worrying about what the future might bring. By making a plan you will be able to see the art of the possible.
If you’d like to learn more about what your financial future could look like, why not get in touch and speak to one of our expert advisers. We’re offering everyone with £100,000 or more in pensions, savings and investments a free review worth £500.