Why is retirement planning so important?
As recently as 2019, the average pension pot at the age of 65 in the UK stood at around £61,897.
Not only is this thought to be relatively low when you consider that the average retirement length in the UK is as high as 19 years for men, but it was also revealed that 17% of Brits over the age of 55 had no private pension savings at all.
So, regardless of your age, it’s crucial that you plan for your retirement and take proactive steps to achieving long-term financial security. Here are some ideas to help you plan for your retirement effectively:
Calculate How Much You’ll Need in Retirement
If we use the figures above to assume that a man has a pension pot of £61,897 to cover 19 years of retirement, this equates to just £3,257.73 per annum.
Even when this is supplemented by a typical state pension of £175.20 per week, this only equates to another £9,110.40 per year and makes it incredibly hard for pensioners to fund any kind of retirement.
In order to calculate any shortfall and your financial requirements during your retirement, we’d definitely recommend working out precisely how much you need to live comfortably once you’ve stopped working. Even in the best-case scenario, you may have less money to live on during your retirement, so you should understand your needs in terms of both essential and discretionary spending.
This will enable you to prioritise spending and make savings without overly compromising your lifestyle, which is important given how hard you’ll have probably worked to this date.
Verify Your Pension Income and Create a Plan
At this stage, you’ll need to consider precisely how much income you can expect in your retirement. This can be derived from many sources, including private and state pensions and investments.
If you have multiple pensions from different workplaces, you may want to consider combining these into a single pot. This way, you can accurately calculate the income you can expect in retirement, either in the form of a lump sum payment or more frequent withdrawals.
Your total pension income (including investment yields) can then be compared with your estimate cost of living during retirement, the latter of which should factor in any planned trips or large-scale items of expenditure.
This way, you can create a realistic and viable pension plan, while determining whether you need to seek out additional income going forward.
Seek Out Additional Income Where You Can
If you do need additional income, there are several options that you may be able to leverage. You could continue to work on a part-time or freelance basis, for example, working fewer and more flexible hours while potentially earning more per single contract.
Other income options include equity release, which is available to individuals aged 55 and over and enables you to realise the value that remains in your property.
If you’re struggling for capital and lack financial resources, another option may be to use your valuable items as collateral to secure a loan.
This could be a solution if you’re struggling to access a personal or unsecured loan, while it enables you to source valuable funds without having to overly compromise your lifestyle.