What is the most important part of retirement planning?
Planning your retirement can be a complex process with many different things to consider? It can be a bit of emotional time which is normal as your mind will be adjusting to a potential change of circumstances. But what exactly is the most important part of retirement planning to cosider?
The most important part of retirement planning is deciding what you want to do with your time. Next, you have to figure out how to fund the retirement lifestyle that you want to live.
Decide what you want to do in retirement
You might worry about not having enough money for retirement, but do you know what it is you actually want to do in retirement?
Answering that question is the first step in planning your retirement. Maybe you want to travel the world, spend more time with your family, perhaps start a new hobby or try all the things you’ve never had the chance to do before because you were too busy working. The early stages of retirement can be an emotional time but A happy retirement looks different for everyone, some people want to work after retirement but there are certain things you can do to help make it achievable for you.
Regardless of whether you can’t wait to enjoy the freedom or you’re dreading it, planning all the retirement activities you really want to do can help ease the transition.
Work out how much money you will need in order to fund your retirement
Many people think they can only retire at State Pension age. This isn’t the case and under current legislation, you can generally access your pension pot when you reach 55 and could possibly retire early. However, just because you can, that doesn’t always mean you should.
Everyone’s circumstances are different, and your pension pot needs to cover you for as long as you’ll be around — the last thing you want is for it to run out, especially if you have unexpected costs and care fees.
Consumer website Which?, surveyed thousands of its retired members and the results showed the average retired couple in the UK spends £26,000 per year to have a comfortable retirement. For individuals, the figure is £19,000.
The average UK life expectancy is currently 83.1 for women and 79.4 for men – making a combined average life expectancy of 81 in the UK.
Read our article on retiring at 55 to see how much money you’ll potentially need to retire, depending on your circumstances and retirement goals.
Find out what’s in your pension pot and how it can be used to give you the retirement you want.
Find out how much you have in your pension pot and how much your retirement income could be by checking the details of all the workplace pensions and/or private pensions you’ve paid into during your working life.
If you’re not sure what pensions you have, read this article to find out about tracing and finding lost missing or forgotten pensions.
There are essentially two types of pension in the UK; ‘defined benefit (DB)’ and ‘defined contribution (DC)’. As you might be able to guess from the names, one is characterised by how much you get each month and the other by how much you pay in. It’s important to understand the difference because each type has pros and cons that will affect your retirement plans.
Read all about ‘defined benefit’ and ‘defined contribution’ pensions in our helpful article “What’s the difference between defined benefit and defined contribution pensions?”
Retirement Planning Process
After working most of your life, it can be difficult to imagine what you’ll fill your days with when you’re retired. Thinking about how you’ll fund it and whether you can afford to maintain your desired lifestyle can be a worry, but with proper retirement planning advice, it doesn’t have to be.
Many people tackle retirement planning by focusing on the numbers first and foremost, devising retirement plans to fit around their future finances rather than considering what their ideal retirement looks like and then looking at whether their pensions, savings and other financial assets will provide enough income to fund it.
Here at Joslin Rhodes Pension & Retirement Planning, we approach things differently and begin by considering your ideal retirement lifestyle. We then look at how your pension pot combined with your other assets as a whole, can achieve this for you and help make sure your finances work for you, so you have the money available to do what you want when you want.
Find out more about how Joslin Rhodes uses the PlanHappy lifestyle financial planning process to put your retirement goals at the heart of the process to help you achieve the retirement lifestyle you really want view our retirement planning advice page.
What are common mistakes in retirement planning?
Many people think retirement begins at state pension age (currently 66 in the UK). Employers used to be able to force workers to retire at 65 (known as the Default Retirement Age), however, this law ended in 2011.
Usually, you can access a private pension from the age of 55 and possibly retire over ten years before you’re due to start receiving your state pension.
Often when planning for retirement people focus only on finances assuming it’s simply about working out how much is enough to get by on in retirement; working out how much they have, how long it needs to last and dividing one from the other to allow an annual income. However, by restricting yourself to a fixed annual sum, you’re not allowing any level of flexibility and are likely denying yourself so many of the things you might want to do in retirement.
Maybe you’ve got some definite retirement goals in mind like a once in a lifetime holiday, taking up new hobbies, buying a dream car or taking early retirement. However, working out how to fund retirement and afford to do those things can cause many sleepless nights.
So, maybe you know what’s in your ISA, bank account and, with a bit of investigation, your pension pot. At some point you know you’ll receive your state pension and that’ll top you up. Plus, you’ve possibly considered what age you might live to, based on your own health and family history. These are all important aspects, and will certainly help you plan for retirement, however have you thought about the following?
● Inflation – Due to inflation living 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 for retirement.
● Life stages – You should consider the fact that 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
● Care costs – The cost of support to continue living independently in your home in later years or
the added need for residential care, needs to be factored in. The government assumes that
people will pay for their own care, so this can be very costly.
● Enjoyment – And don’t forget what it is you’ve been working your whole life for to enjoy in
retirement; that dream car or motorhome, a once in a lifetime trip, the chance to help your
children or to finally get that new kitchen fitted.
With proper finance and retirement planning, it’s possible to see how your finances can be used to fund the lifestyle you really want in retirement and work out what having ‘enough’ actually means to you.
To make things easier to work out, the Pension and Lifetime Savings Association (PLSA) has benchmarked three levels of everyday lifestyle costs. Split across Minimum, Moderate and Comfortable, these show what you can expect to spend in retirement.
The information in these tables might help give you an idea of how much income you’ll need for the retirement lifestyle you want.
Want to understand your pension and retirement options?
To make sense of your pension options and get started on your journey to retirement, you can take our free no-obligation meeting.
You’ll be able to speak with our financial advisers who can explain our PlanHappy Lifestyle Financial Planning process, how it can help you, but most importantly, you can work through what it really is you want to do in retirement.
You tell us what you want to do, you tell us your goals and aspirations, and then we start your journey to
✓ Retirement Savings – how much you need to save for retirement
✓ Retirement Date – when you can afford to stop working and start enjoying financial freedom
✓ Retirement Income – how much you can spend in retirement without worrying you’ll run out
So, if you’re looking to make sense of pension and retirement planning options with straightforward
financial planning advice, we’re here to help.
Contact our friendly team on, 033 0133 3035 or click here to arrange a free call back from one
of our experts.
Joslin Rhodes Pension & Retirement Planning – Real Advice, For Real People
Joslin Rhodes Pension & Retirement Planning is authorised and regulated by the Financial Conduct
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