In the Guardian over the past months, they have been running a retirement feature. One of the articles was entitled “How to retire successfully” and it dealt with the fact that you need to make sure that you get what you want out of your life. This is obviously very simplistic, but how can you ensure that your retirement is successful?
Obviously money is a major consideration here. For a start we don’t know how long we will live for or how much money we will need. However, money, whilst important, isn’t everything. Surely, the elements of a successful retirement are similar to the elements of a successful life? Close friends, a loving family, good health, happiness, a hobby/focus outside work, a budget and a plan?
What do your retirement finances look like?
As we’re financial planners, our focus for your successful retirement tends to be on funding a successful retirement and reviewing your finances. Plenty of newspapers have been carrying warning messages about whether we will have a generation of people who can’t afford to retire and questioning if a financially comfortable retirement is really attainable?
According to a two-year review by The Independent Review of Retirement Income (IRRI), people should put 15% of their entire lifetime earnings into their pension pot merely “to avoid future pensioner poverty”. Workplace pension schemes, the biggest shakeup to pension savings in recent years, have set the minimum contribution (from employers, employees and government tax relief) as 8% of earnings. This is clearly a great first step, but only half of the amount needed. Added to this, many are only starting to save part way through their working life, whereas the IRRI report is based on “entire lifetime earnings”.
Are you saving enough?
As a society, Britain is not putting aside nearly enough for life after work, a period that can now continue for decades. The new state pension – available to men born on or after 6 April 1951 and women born on or after 6 April 1953 – is currently £159.55 a week to those who have paid a minimum of 35 years of National Insurance. However, many will not receive the full state pension. It is estimated that there are currently 70,000 men and women who have fewer than 10 years’ national insurance contributions.
A comfortable retirement = £20,000 a year?
So if people haven’t been accumulating enough using their pension, what other routes are available to them? This is where savings become increasingly essential. But a 2016 report for Scottish Widows found that 47% of 30 and 40 year olds have insufficient savings. In our previous articles we have talked about the importance of having a financial plan earlier in life because as these figures confirm, we are massively underestimating the amount of money we will need to retire. According to Saga’s Investment Series, over-50s reckon you need just over £20,000 a year to have a comfortable retirement.
But remember that a successful retirement is about being happy and doing the kind of things that you want to do. Here are a few tips to help you get there. To enjoy your retirement you will need:
- A clear vision of the kind of life that you want.
- Retirement savings
- A workable financial plan
- Realistic expectations
- A nurturing family, strong personal relationships and an active social network