OVERVIEW
Saving for retirement is crucial. With inflation and living costs ever rising, the UK state pension alone is becoming less and less likely to cover your living expenses.
The current £11,962.60 a year, while a helpful safety net, typically provides only a basic income that may not meet the needs of many retirees.
PENSION & RETIREMENT INFORMATION
According to the Pension and Lifetime Savings Association (PLSA) the minimum a single person household needs is £14,400 – £22,400 for two people. This covers a £50 a week food spend, a week-long UK holiday and not running a car.
For a moderate retirement, a single person should aim for £31,300 a year, that’s £43,100 for a couple. This covers a three-year-old small car, replaced every seven years, £10 per week on take away food and a £100 meal, and a fortnight 3* all-inclusive holiday in the Mediterranean and a long weekend break in the UK.
And for a comfortable retirement it’s £43,100 for one, that’s £59,000 for two people. For this you get a new kitchen or bathroom every 10 to 15 years, a £70 grocery shop every week and a fortnight 4* holiday in the Mediterranean and three longer weekend breaks in the UK. Broadband, fuel and other costs remain largely the same across the board. But what other expenses might you have to take into account when planning out how much money you need to retire?
HEALTHCARE
UNEXPECTED EVENTS
LIFESTYLE CHOICES
And finally the good bit – lifestyle choices. The golden years can be a richly rewarding time of travel, hobbies, creativity, spending precious time with loved ones, and experiencing a new freedom. But it comes at a price.
Saving as much as possible, as early as possible, will help put you in the strongest financial position for life after work.
PUTTING YOURSELF IN A STRONG POSITION
Here are some effective ways to achieve this:
PENSION SCHEMES
Contributing to a personal pension or workplace pension scheme is fundamental. The UK offers various types of pensions:
Workplace Pensions: Automatic enrolment means employers contribute to your pension, and you benefit from tax relief on contributions.
Personal Pensions: Voluntary savings plans where you can choose how much to contribute and how to invest.
Self-Invested Personal Pensions (SIPPs): Allow greater control over your investments within the pension.
ISAs (INDIVIDUAL SAVINGS ACCOUNTS)
INVESTMENTS
Diversify investments in stocks, bonds, and real estate to build a robust portfolio. Consider low-risk options as you approach retirement to preserve capital.
SAVINGS ACCOUNTS
Maintain an emergency cash fund in high-interest savings accounts to cover unexpected expenses or gaps in income.
PROPERTY
Some people downsize or rent out property to generate additional retirement income.
Research by the PLSA shows 51% of people focus on their current needs and wants at the expense of providing for the future and only 23% of people are confident they know how much they need to save.
If you haven’t saved for retirement, you may face some financial challenges in retirement. Relying solely on the State Pension and other benefits is unlikely to be enough to cover your living expenses. No one wants to find they have to extend their working years as they haven’t saved enough.
GOOD FINIANCIAL PLANNING IS KEY
Start early and regularly review and adjust your retirement plan with your financial advisor to ensure it aligns with your changing needs and market conditions.
