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Over the next few minutes, we'll use this article to guide you through the process of planning for retirement, helping you set achievable financial goals and create a roadmap for your future. Whether retirement is decades away or just around the corner, having a solid plan in place is essential for enjoying a fulfilling and financially secure retirement.
Retirement often seems like a distant dream, and it's easy to put off planning for the future. However, 'time' is your biggest asset: the sooner you start planning, the better prepared you'll be to achieve your retirement goals.
Retirement planning isn't just about contributing to your pension, it's about envisioning the life you want to lead in retirement and reviewing your pension progress, to make sure you're always on track.
Why is it so important?
The latest government figures show that the average pension in retirement is worth around £190k1, providing around £7,500 a year in income. Studies from the Pension and Lifetime Savings Association (PLSA) state that the MINIMUM living standards in retirement, require an annual income of £14,4002.
Without adequate planning, millions of UK workers risk never being able to afford retirement.
Success comes from solid foundations, for Retirement it's about setting a goal that motivates you and is achievable.
Think about where you want to live, what activities you want to pursue, and how much income you'll need to support your desired lifestyle. Setting specific, measurable, achievable, relevant, and time-bound (SMART) goals will give you a clear roadmap to follow and keep you motivated along the way.
Meet Emily, a 50-year-old nurse who is preparing for retirement. Emily dreams of traveling the world in retirement but is unsure if she'll have enough savings to make her dreams a reality. Emily decides she needs to set her Retirement Goals, to help her track progress:
S: I want to retire close to my family, on the south coast of England
M: I would like to retire with an annual income of £25,000
A: I would like to keep my annual income below a "safe withdrawal limit" of 4%
R: I will use my workplace pension and future contributions as my main source of income
T: I would like to retire my age 65
By setting SMART goals, Emily can review her current pension to see if it will provide the income that aligns with her retirement aspirations, if it doesn't Emily knows she can: adjust her target retirement age, increase her contributions or find a pension scheme provides better performance: so that can she can save towards her Retirement Goal without increasing her time nor contributions.
With your retirement goals in place, it's time to create a plan to achieve them.
1. Start by thinking about what you'll spend your money on in retirement. Common expenses include: Housing, Food, Transport, Holidays & Leisure, Clothing & Personal expenses along with Charitable Givings (including Birthday & Christmas presents)
2. Once you have your expenses, understand your target annual retirement income. For example, if you've estimated monthly costs, multiply that number by 12, this is the number we'll use to assess your Retirement progress.
3. Next, use a calculator (like our Retirement Planning Tool), to understand what contributions you might need to make, to achieve your retirement lifestyle.
Tip: At this point it's often good to play around with different scenarios, change the length of time and the amount you might contribute and find a comfortable balance between: duration, contributions and retirement lifestyle.
4. You have a goal, you have a plan now it's time to assess your current progress. Review your current pension scheme, you can use our Retirement Forecast tool as a starting point. Are you on track? If yes, you don't need to do anything! If not, you may want to consider a pension scheme like eurikah's that's helps optimize the performance of your pension, so you can achieve your Retirement Goal.
Remember: "it's about time." A little bit of work now, could transform your life tomorrow:
