Having a Retirement Plan

“Always plan ahead: it wasn’t raining when Noah built the ark” – Richard Cushing

Retirement Stock photos by Vecteezy

Now, we understand that retirement may be the LAST thing on your mind, as it seems so so far away, which it is! However, the reality is the sooner you start considering and planning for retirement, the more you will enjoy it! The State pension age currently sits at 66, and as life expectancy continues to rise, it’s crucial to make sure you have enough money to enjoy retirement! Check out more info on current state pensions here. 

Retirement Expenses: 

Just because you have finished working, does not mean you stop paying expenses! You will still have to cover housing costs, including rent/mortgage etc. On top of this, you may still be paying for a car, as well as the range of taxes and insurance costs that present themselves.

Healthcare is arguably the most important of these expenses, as these costs will likely rise in your later years, for example through care home costs or medication.

Retirement Income:

The good news is, just because you finish working, doesn’t mean you stop earning! Income can arrive through numerous channels, including Social Security Payments, Employer Sponsored plans, and Personal savings.

Social Security payments are paid by the government to you every month. How much you receive will depend on both how early you retire, and how much you earned when working.

Employer sponsored plans involve your employer matching your pension contributions throughout your time at work. You put in £1000, they put in £1000 – simple!

Finally, your individual savings, the money you choose to put aside throughout your life, will leave you with a pot of money that you have complete control over!

The Replacement Ratio is the fraction of money you earn in retirement compared to when you were employed. This figure lies between 70-80%, so this is a good indicator of how much you’re going to need to get by!

Challenges with Financing Retirement: 

Perhaps the most important thing to consider is the host of challenges associated with retirement. As mentioned earlier, longer life expectancies result in you needing larger pots of money to fund your post-work life!  Furthermore, rising costs of care (for example care homes) means you are going to need to save more money. As the value of your savings may go up or down (due to market volatility) you are relying on the market performing well to make sure you maximise your pension savings!