Despite the grave importance of saving money, a lot of people tend to set money aside — including those that are near retirement. In fact, a study published by the Money and Pensions Service found that around three million over-50 professionals will either be leaving their retirement financial plans to their final two years of work or not plan at all.
This is in spite of the fact that half of those who recently retired advise working adults to start planning earlier.
To ensure that you are able to have enough money to last your entire retirement, it’s not only imperative that you save early and learn how to spend money wisely. You also have to sit down and start planning out your retirement.
Determine how much retirement income you’ll need
The latest findings of the New Choices, Big Decisions study reveal that about 74% of UK savers are spending their pension too quick— increasing their chances of running out of money with a third of their retirement still ahead.
To keep yourself from experiencing the same fate, the best way to start planning would be to determine how much retirement income you’ll need as early as today. However, with everyone’s expectations for retirement very different, knowing the exact amount can be rather challenging.
To at least have an idea of just how much you would need, you can look into the retirement living standards (RLS) curated by the Pension and Lifetime Savings Association. The RLS’s minimum standard, which can cover essential needs and a comfortable lifestyle, for a single person, would be roughly £10,000 a year.
To attain the moderate level that provides greater financial security, you will need £20,000. Finally, to reach the comfortable level where you can maybe afford lavish trips and regular beauty treatments, you’ll need £30,000.
These numbers are only rough estimations, so factors like mortgages, location, and healthcare must also be considered. If, say, you want to get a retirement home, places like here in Essex where the average price of a flat can be £168,029, can be a good idea. To get a closer estimation, it would be best to have a clearer picture of what exactly you want your retirement life to be like.
Know your options
Once you’ve determined a more or less solid retirement savings goal, the next step is to figure out how to get there. In this regard, it’s crucial to look into the different pension options available so you can mix and match according to your needs.
A state pension, for instance, is a regular payment scheme from the government and can be around £168.60 per week, if you have paid National Insurance contributions for 35 years. The employer pension, on the other hand, is the money your employer pays into your pension, in addition to what you contribute each month.
Self-Invested Personal Pension (SIPP), as the name suggests, is a type of personal pension that is tax-efficient and allows you to pool your money into one pension pot. Aside from SIPP, you can also apply for other personal pension plans that you can make contributions to and build towards retirement with.
While a state pension and an employer’s pension are both reliable enough, you would still want to tap into all the other options mentioned. After all, having different pots can provide you access to a wide variety of attractive features and increase your financial capacity during retirement.
Get professional advice
Not all of us can easily make sense of the headache-inducing terms and clauses used by pension providers and pension programmes. If you are having an especially hard time identifying your options and narrowing down your choices, it’s time to get professional advice.
There is a myriad of organisations out there that offer free guidance. You can also search for a financial adviser specialising in retirement planning through platforms like the Retirement Adviser Directory from the Money and Pensions Service.
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