Planning your retirement income
We all know it’s important to plan for retirement, but many of us are still not planning well enough. Despite all the media headlines and Government initiatives, many of us still have a ‘tomorrow will do’ attitude. This is worrying for one simple reason – we are going to live longer than most of us think.
Some of you will have seen in the news that as a result of our great nations dire economical plight, the government are pushing back the age at which we’ll be entitled to draw down our state pension entitlement. In a few years this will fall back to age 66, then implementation to age 67 and 68 planned to be staggered over the next 40 years or so. The way it is going, it is expected that for new born children this year, these individuals won’t be able to draw down on their state pension benefits until age 70 at least!
There are further government proposals in the pipeline to reform the state pension system, but even with the proposals to bring in a minimum weekly state pension from 2017, the indications are that this amount will still be well short of the amount most people will need to live on. Therefore, state provision CANNOT be relied upon in isolation.
There are many ways to save for retirement, with State pensions, Company and personal pensions, property, business assets and ISA’s just to name a few. We advise on all of these sources of income, firstly establishing which of these provisions you have currently, as well as ones you may acquire or become entitled to at a later date. After this analysis and determining how much capital and income you will need at a pre-determined retirement date, we then advise on what your shortfalls are likely to be, and set to work on recommending how to put this right. Regular reviews are then essential throughout your working career and retirement years to ensure pre-set targets remain on course.
Many people don’t have a set retirement date in mind, but that’s only because they haven’t received advice on the subject in any detail previously. Our reviews seek to put this right. Why buy an investment property or invest into a pension plan without knowing what it’s likely to do for you in your ‘silver’ years? Ask yourself a key question; Do you enjoy what you do for a living, and health permitting, can you see yourself continuing to work in that job beyond age 65?
Even if the answer is yes, if ill health strikes prematurely, you may be forced to give up that job and face a reduced income at a time you won’t have been able to anticipate all those years before. If the answer to the question is no, you need to be planning to retire on the desired level of income at an earlier age – perhaps age 55-60 is your ideal scenario because you generally dislike going in to carry out those day to day activities, or in the case of your role being one of a manual nature, you expect your position to have a physical ‘shelf life’. If you want to retire earlier than the government will dictate to us, don’t give up hope of this just because you are 10-15 years off this target. We have helped many people aged even in their forties and fifties, to plan a strategy to retire when THEY want, and on the income they NEED.
If you’re still unsure as to what age you’ll retire, our advice is that with our help, pick an age as accurately as you can given your personal circumstances, and go for it. This age won’t be set in stone, and will have plenty of room for manoeuvre later on. However, you will have made one of the biggest steps in achieving your retirement goals (even if it us that prompts you to have a goal in the first instance!!). Think about a scenario whereby you achieve financial independence at age 65, or anytime before this, but decide to work on for a couple of days a week because YOU want to. This is the difference between financial dependency and financial freedom. Which would you prefer?
The following extracts try and explain some of the common options open to clients in building up their retirement savings, as well as when they come to take their retirement benefits.