Is retirement on the horizon? Do you feel that it’s approaching and there’s nothing you can do about it? Jacqui Bateson looks at how you get your plans on track without the headache
If you feel that retirement is approaching and there’s nothing you can do about it, you’re not alone. Skipton Building Society’s latest Retirement Tracker research found 40% of people aged 40 to 60 say they can’t afford to save for retirement. And of those who are 65 or older, a fifth said that they chose not to save for their future.
How to plan for the long term
Historically, retirement was an event. From when we started work, we knew one day we would leave, clock or watch in hand, and the next day we would be retired.
But the world has changed. We’re living longer – the average life expectancy for UK adults has risen to 85 and looks set to continue to rise. As a result, we’re spending decades rather than just a few years in retirement. The idea of having to support ourselves for up to a third of our adult lives outside of work can create uncertainty and fear.
It’s no surprise that the natural response to this is to put it to the back of our minds and ignore it. Our research has shown that 48% of the population have their heads in the sand when it comes to planning for retirement and don’t think about it at all.
But if you are serious about getting your retirement plans on track, you might ask yourself some of the following questions:
- When is the right time to stop working and how can I make a plan?
- How much money do I need for my retirement?
- I want to make the most of my retirement but how will my money last?
- I have plans for the things I want to do, but how will life change in retirement?
The closer we get to retirement, the more real it starts to become and that’s when we start dreaming about what it means – more time for holidays, hobbies and friends and family. But a dream without a plan is just a wish. The problem is, we’re all so busy getting on with our daily lives, and it’s hard to find the time and motivation to pause, think about the future and put plans in place.
What can you do to get your plans on track?
A few years ago, I was doing an exam, and someone said to me: ‘When you get the results, you’ll never regret the amount of preparation you did. But if you fail, you may well regret not doing more.’ And this has stayed with me.
If you want to make the most of your retirement, you need to start to plan. Whatever stage you are at, it’s better to take action so that you don’t fall blindly into retirement.
Have short, medium and long-term goals: it’s important that you understand your finances really well and how you intend to spend it today to inform how you can save for the future.
Talk to significant others in your life about your plans: we’ve found that when people start to talk about their plans there can be real differences in expectations so it’s important to share your thoughts to ensure you are on the same page.
Set some time aside and stick to it: plan some time in your diary, much like you would with a social event. Around 40 minutes is about right – long enough to really think about things, but not so long that you lose interest. You’re unlikely to review everything at once, so decide what you’re going to look at and stick to it. Just remember that over time, you need to cover everything.
Know your finances: pensions have become synonymous with retirement, and while they are an important aspect, they are not the only source of income you might have in retirement. Don’t forget:
- Paying off your mortgage before you retire frees you of a significant monthly financial commitment. Take a look at your mortgage payments to see how you are doing – it might make sense to overpay if you can.
- Take a look at your day-to-day bills and expenses. A look at how much you pay for utilities, mobile phones and even how much you spend on coffee or lunches could be an eye-opener. Small savings can add up over time.
- With an increasing number of job changes throughout our working lives, many people have pension pots in different places. Be clear about what you have and where. The government’s Pension Tracing Service can help you track down lost or misplaced pensions.
- Do you know when you will be eligible for the State Pension and if you will receive the full amount or not?
- If you have savings and investments, such as ISAs and other assets, these will also form part of the wealth you have available to draw on in retirement.
Budgeting: have you thought about how your finances might change? It’s easy to assume you will spend less. While it might be true that not commuting to work every day will save you money, will you spend as much, if not more, by going on holiday or taking up new hobbies?
Seek help: if this feels like a gargantuan task, why not ask for help? Many employers provide support for those nearing retirement. You may have family and friends who could help, or perhaps speaking to a specialist financial adviser is the route for you.
At Skipton Building Society we are committed to helping you plan for your life ahead. If you want help and time to pause to plan then feel free to get in touch.
Retiresavvy is brought to you by Skipton Building Society. This article has been commissioned by retiresavvy and any opinions voiced are the author's own.