When it comes to retirement there are two ways it could go for you. There’s the dream scenario we all hope for where our money outlives us or the disaster scenario where we outlive our money.
This is why retirement, the point in life where you stop working and start to use your savings to live off, is such a big momentous stage in your life.
This is not something that can be brushed off and left to chance. It takes time to plan and organise for.
It’s highly likely that you could spend around 30 years in retirement, around a third of your life. That’s a long time without a job and no further income going into the savings pot. Only withdrawals coming out.
If retirement is to be a third of your life, then you don’t just want to be surviving, you want to be thriving.
The problem with not being financially prepared for retirement
If you haven’t put the work in to prepare for your retirement, you haven’t sought the support of a trusted Financial Adviser who can help you understand what you don’t know then the danger is at some point your money runs out.
If you deplete your retirement savings, then there is no magic fund to come and rescue you. You’ll be left with the State Pension and whilst that may provide with some form of income until you die it certainly won’t allow you to thrive.
It might mean missing out on doing those bucket list items. Not getting to travel to the places you missed out on whilst working because you were too busy and couldn’t get the time off.
It could mean each day is spent with a little bit of worry and hesitation about whether you can afford to go out and have that coffee or meal.
You may lose social ties with friends and family because you can’t afford to meet up.
Perhaps you have a family you are keen to support in retirement either physically and/or financially. How would you feel if there was nothing left to gift them?
I’m sorry to paint such a bleak picture but I wanted to hammer home the point. You are on your own when it comes to retirement. It’s down to you to ensure you have enough in the pot and know how to use it.
Here’s how to ensure you can be retirement ready.
How to prepare for retirement
#1 – Decide how you want your retirement to look
In order to know how much you need in your retirement savings pot you need to have a think about what your retirement will look like.
What sort of things do you want to do?
This starts with looking at the basics in terms of weekly spending on food and bills to travel plans, when you might need to replace cars and whether you want to gift money to family or charity.
If you struggle to comprehend what your spending levels might be in retirement have a look at what you spend now as you’re probably going to want to at least continue the lifestyle you have now into retirement, especially in the early stages.
The Pensions and Lifetime Savings Association have done some good work on analysing what different levels of retirement cost.
#2 – Know your number
Once you know how much your retirement is going to cost you can work out the amount you need in your savings pot to cover it.
This is a crucial number to understand because until you know this how do you know when you will be ready to retire.
Now of course after coming up with your goals and desires for your retirement you may find that the number you need is too high and not achievable but at least you know now and can go back and adapt your goals.
#3 – Know where you stand
Hopefully if you are reading this and are thinking about retirement you already have some savings.
It’s important to know what you have already so you can work out how much more you need to reach your number.
This includes finding out the status of your State Pension and workplace pensions. What do they give you?
What other savings do you have?
#4 – Pension consolidation
If you have lots of different pensions from different jobs, then it might be better to transfer these pensions altogether to one provider so you can understand exactly what you have and make it easier to manage going forward.
Before transferring any pension though you need to check you are not giving up any valuable benefits which would be lost on transfer.
#5 – Investment strategy
More important than any pension provider is the underlying investment strategy you choose.
It doesn’t really matter whether you choose one pension provider over another. They will all be pretty similar. What is far more important is understanding the investment funds you pick for your pensions and other savings products like ISAs.
Remember, your retirement could be lasting 30 plus years and during that time inflation is going to reduce the purchasing power of your retirement savings pot unless you invest in a way that grows your pot to at least keep up with inflation or better still outgrow it.
This is going to involve you understanding and getting comfortable with the global equity market. The stock markets that list the great companies of the world.
#6 – Planning for the unexpected
If you’re a couple, then hopefully you are looking forward to spending the next 30 plus years together, but you never know what’s around the corner.
I have met a number of clients where we have planned diligently for retirement only for one of them to be diagnosed with a very serious illness right at the start.
You need to test a few disaster scenarios to see what would happen if one of you was no longer around and the loss of income that might die with you. Is there enough there for the survivor?
#7 – Support network
A great retirement plan requires a great retirement planner.
A Financial Adviser who can help you not only clarify your goals both emotionally and financially but also guide you through the ups and downs that will come along.
Picking you the optimal investment strategy to help you ensure you never run out of money. Helping you stick to the plan when the stock markets inevitably crash which they could do at least three to five times during a 30-year retirement.
It’s not just financial side of life that you need to focus on when preparing for retirement, you also need to think about the psychological impact.
What are you going to do with your days? How are you going to stimulate your brain and find social interactions? What purpose will you have in retirement and what will get you out of bed in the mornings?
It’s been said that you are only old when your memories outweigh your goals. So don’t stop thinking and planning nice things to look forward to and achieve.
If you would like to get your retirement sorted then please get in touch for a free no obligation 15-minute call. We would be happy to review your position, explain where you stand and what you need to do to get the outcome you desire. We have created hundreds of happy and protected retirements over the years. This could be you too.
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.