With retirement lasting as long as your time in paid employment, it is never too early to begin looking ahead and get everything in place. But what are the benefits of a retirement plan and why have one?
What is a retirement plan?
A retirement plan can be looked at as a map that shows how you will achieve a certain lifestyle when you choose to retire. You need to examine what your income targets might be and what you need to put in place to realise them. Things to consider include:
• Income Streams
• Investments & Assets
Your retirement plan is flexible – you can alter it as your life changes, and as your desires for retirement change. You may put away a lot of money to retire by 45, but when you get there you may realise that you actually wanted to start your own business, and so you choose semi-retirement instead. You may have a large family, and so ramp up your savings as you move toward retirement age instead.
How many people in the UK have a retirement plan?
Retirement planning is a little like making a will. We all know we should do it but surprisingly few actually do. According to latest figures from Statista.com, just 14% of the working population of the UK currently have a written plan and nearly half have no plan at all. Those statistics change little from year to year.
Bearing in mind the increase in life expectancy, those numbers are shocking. Of course, that is not to say that many of those without retirement plans aren’t paying into a pension scheme, but it is unlikely they have any idea what their income might be once they stop work. With the full State Pension standing at £175.20 per week, more people need to ask themselves how they are going to finance a comfortable lifestyle in retirement.
Why do I need a retirement plan?
7 Reasons Why You Need a Retirement Plan
1. Live expectancy is rising – and we all want to live long lives. Average life expectancy in the UK is around 79 for men and 83 for women with many living much longer. To ensure a good quality of life in retirement requires a plan, otherwise you risk simply running out of money should you live longer than you expect (or more likely, ever given thought to).
2. No one wants to have to work forever. Few of us choose to work until our last years. Even if you love your job or own your own company, you likely won’t want to have pressure to continue to make money. A retirement plan can include both your intentions to continue working and a way to ensure that you can choose to take a step back whenever you choose to.
3. You can have the freedom to do what you want. For many, retirement offers a chance to do things they always wanted. For the first time they are free of responsibility and have the time available to check off that bucket list. None of this is free, and a retirement plan is a way of ensuring that you have the finances to fulfill your dreams.
4. Few can live off the state pension. As pointed out earlier the State Pension will give you about £175 a week. With the best will in the world, though you may be able to feed yourself for that amount, treating yourself may not be possible. You need to plan so that you can top-up this entitlement. There’s also the worry that it will change before you retire. (Check your state pension forecast here.) The state pension age is gradually moving (currently 66), too, which is something we must consider when planning for retirement.
5. You can give yourself a safety net. The past may be a foreign land but so is the future. When 2020 began no one knew that COVID-19 was about to disrupt everyone’s lives. None of us can be certain what life has in store in the future either personally or on a worldwide basis. These unknowns are why a retirement plan is vital, so you can give yourself a safety net should life change unexpectedly.
6. Maintain financial stability for your family. Many of us want to help our children and a retirement plan enables us to do this even when we have stopped working. By ensuring an adequate income, the bank of mum and dad can remain open for when those inevitable financial hic-cups affect our loved ones. There is also a good chance that when you die, you will leave behind a worthwhile financial legacy.
7. Being a “burden” in our older years is something good retirement planning can avoid. While a lack of planning may be made up for by the kindness of your family, that is not something many of us would be happy about. No one wants to be a burden and a good retirement plan will avoid that.
What’s the risk of not having a retirement plan?
Many people go through life thinking the future will take care of itself. Sadly, that is rarely the case. Simply thinking that your work pension will take care of all your financial needs once you retire is likely to result in disappointment. You need to take responsibility for your retirement, work out what your pension guarantees and make certain that other pensions and investments are in place to top it up.
You must not leave it to chance and just hope it will be alright. You have to take control of your finances as early as you can and make that retirement plan if you are to experience the sort of retirement you envisage.
Your years of retirement are not just tacked on at the end; they form a significant portion of your life. You owe it to yourself and your family to make those years as comfortable and fulfilling as possible.
I have a significant investment portfolio; do I still need a retirement plan?
If you have been fortunate to have made enough to be able to build up a portfolio of stocks and shares and other investments such as property, that puts you in a strong position. But you should also make sure you have a retirement plan in place – even if it’s a simple plan to shift your stocks and shares to government bonds and slowly liquidate properties as necessary, rather than continuing to grow your property portfolio.
A plan will make sure you are on track, that your investments are growing as they should and that, come the day, they will provide an adequate income.
Good investments can certainly provide your retirement income but should be part of a plan if you want to be sure they are going to give you enough money to live how you want to live.
What should I do if I’ve left retirement planning late?
If you’ve left retirement planning late – then you have a couple of options.
1) Start putting money away today: late is one thing, but if you are still working then you have time to continue putting money away.
2) Consider equity release if you own property or other valuables: find out more about equity release and how it can give you the retirement you deserve here.
3) Talk to experts about what you’ve got and where to go from here – we’re here to help do a review of your current assets and review what you can do to set yourself up best for retirement. Click here to get started with our clear, straightforward advice.
A retirement plan isn’t just a good idea, it is indispensable if your retirement is to be a happy and enriching experience. Only 14% of people may have a written plan, but they are the wise ones. Make sure you are one of them and don’t simply settle for the pension you’re given by your company. Do your due diligence and make sure your money is in the best place it can be.
Making certain your plan is a good one and growing as expected can be difficult because there are so many contributing factors. Our team of experienced financial experts that can bear the burden of your retirement planning. They will advise you about pensions and investments and make sure you have everything in place so that when the time comes to give up work you will have the sort of retirement that is life-affirming.