Life changes when you retire – and so does how you spend your money. Whatever your plans, it’s important to keep on top of things and think about the lifestyle you want. It’s also worth noting the average life expectancy at age 65 years is 18.6 years for men and 21.0 years for women.
So, it’s vital if you are planning to retire soon that you make sure you have enough money to last throughout your retirement. Whether you’re aiming to retire early or have worked way longer than you imagined, retirement should be what you want it to be.
This is a new and exciting chapter in your life. And for a lot of us, retirement will be the first time we can do what we want, when we want. With no job to tie us down, retirement is meant to be a relaxing time. However, your newfound freedom and leisure time could quickly become stress-inducing if you spend too much time fretting about your finances.
When planning for retirement the most important question for many is, ‘How much money will I need to save to ensure I retire successfully?’ To answer this question you need to know how you want to spend your time in order to know how much retirement will cost you.
The amount of money you’ll need to enjoy a comfortable retirement is subjective and very much related to the type of lifestyle you want to enjoy during your retirement, the age you want to retire and whether you’ll receive the full State Pension amount.
An active retirement involving a lot of travel and hobbies will cost more than a quiet retirement spent largely at home. You also have to think about any big-ticket purchases or other plans you’ll need to make.
Make a list of all your estimated retirement expenses and then try to approximate
how much each will cost you. Remember, some of your expenses may decrease between now and retirement while others could increase.
Your housing costs may go down if you pay off your mortgage, but your travel costs could go up if you take a lot of trips and holidays. So you can use your current spending as a baseline, but you’ll have to adjust each figure up or down accordingly.
Everybody’s circumstances are different, but the key considerations for most people when they think about retiring will come down to factors such as:
Knowing how much you need to cover your retirement isn’t always the easiest number to calculate, but you can adjust your strategy depending on the size of your pot.
Once you know approximately how much you’ll spend annually in retirement, you can estimate the total cost of your retirement by multiplying this figure by the number of years you expect your retirement to last, and adding an annual figure for inflation.
At the point you’re in retirement, it’s important to keep to the budget you laid out as best as you can. If you have unexpected expenses come up, try to trim back some of your other expenditures to make up for them so you don’t run short.
In recent years, the Government has made great strides in getting people to save for retirement. With retirement often lasting two decades or more, it is vital to be prepared and build up a retirement income that provides the standard of living you require in the long term.
Whatever your thoughts, to ensure you take account of the full range of available options, we would always recommend you consider obtaining professional financial advice.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE TAX BENEFITS RELATING TO ISA INVESTMENTS MAY NOT BE MAINTAINED. TAX RULES ARE COMPLICATED, SO YOU SHOULD ALWAYS OBTAIN PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT.
THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.
PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.
This content is for your general information and use only, and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. All figures relate to the 2018/19 tax year, unless otherwise stated.