It’s estimated that people aged 45 to 54 spend more time planning their summer holidays than they do planning their pension (1). However, if you want to be able to enjoy holidays in retirement, then you’ll need to have saved enough to be able to afford them.
The common perception is that you’ll need between half and two-thirds of the final salary you received when you were working, after tax,to maintain your lifestyle in retirement. The consumer champion Which? recently revealed that a retired couple need an income of around £18,000 a year to cover their basic living costs. To enjoy extras like holidays, they need around£26,000.
When thinking about retirement, many people find it helpful to draw up a budget that includes all their sources of income, such as any investments and savings as well as pension income, and covers living expenses and includes the type of holidays and leisure pursuits they want to enjoy when they have more free time.
Don’t underestimate how much you need to save to provide the level of income you need. If you’re looking to achieve an income of £26,000 a year at retirement you will probably need to have a pension pot of over£500,000 when you retire, much more if you intend retiring at 55.
How to prepare for retirement
It’s wise not to place too much reliance on the state pension. It was never designed to be anything more than a safety net, and the age at which you can claim it is being pushed back further and further. The government recently announced that it will rise from 67 to 68 in 2037–39, seven years earlier than planned.
Ideally, everyone should have their own pension plan in place. If you’re eligible to join a workplace pension scheme, you should consider doing so as soon as possible, as employer contributions will help towards building up your pension pot. If you’re self-employed, you won’t benefit from employer contributions, so it’s even more important to start saving into your own personal pension plan. Don’t forget that tax relief is available on pension contributions.
It’s not always easy to know exactly how much you’ll need to put away to ensure you’re on track to get a reasonable income when you retire. That’s where taking financial advice really pays. We can help you put in place plans to help make your retirement a financially comfortable time.
(1) LV, 2017
If you’re making plans for your retirement and would like someprofessional advice, then please get in touch.
