How to Calculate if You've Enough to Retire
Learn ways to calculate if you've enough to retire
You're not alone in thinking it's simply about working out how much you have, how long it needs to last and dividing one from the other to allow an annual income.
That seems reasonable, right?
After all you know what’s in your pension pot, ISA and bank account. At some point you’ll receive your state pension and that’ll top you up.
Plus, you’ve considered what age you might live to, based on your own health and family history.
So, let’s say you’re 55 and think you’ll live to 80, you have around £250,000 in assets and therefore need £10,000 a year to live on.
This is the starting point for most people.
But is this the best way?
The problem with this method is it gives you a limited lifestyle and doesn’t account for so many important factors that need serious consideration.
Did you think about inflation?
Costs rise every year, so you’ll need to consider that outgoings will go up yearly. So, even to maintain the same lifestyle you’ll need to factor in inflation.
Do you want to live the same life for the next 25 years?
Experience tells us your retirement will progress through different stages depending on when you’re most active and when you want to slow down. In your active years you’ll enjoy more hobbies and holidays, whereas when you slow down it’s likely you’ll spend less.
Then there’s the cost of support to continue living independently in your home in later years or the added need for a care home.
The government assumes that people will pay for their own care, so this can be very costly.
What about your big one offs?
What have you been working your whole life for if not to buy that dream car, take a once in a lifetime trip, help your children or finally get that new kitchen fitted?
By giving yourself a fixed annual sum, you’re not allowing any level of flexibility and are in fact denying yourself so many of the things you might want to do in retirement.
We think there’s a better way
Instead, we take a different approach to calculating your costs and what ‘enough money’ looks like. This will depend on your circumstances, what you’d like to do and what assets you have.
Through a financial plan, you’ll be able to see how your assets can fund the lifestyle you really want, when you can retire and what you’ll have left at the end.
What is it?
It’s called Lifestyle Financial Planning and we’re pretty good at it. Rated 4.8 out of 5 on Vouched For by existing clients, you’re definitely in safe hands.
If you’d like to find out what your future looks like, get in touch at Stockton on 01642 52 55 11 or Newcastle on 0191 249 42 57.
This pensions calculator is a useful tool which can help you understand your future pension income.