We all know that saving for retirement is an important financial task. However, establishing when you’ve got enough set aside can be tricky.
Yet there are ways to help work out when you’ve got enough to retire – with some strategic thought and careful planning.
Do some calculations
It’s wise in any financial plan to start with a goal and work out how much it will cost to get there.
In this case, it’s retirement – so what does this mean for you? When do you want to retire, and where will you live What will you spend your time doing?
Crucially, the idea here is to define an amount and work backwards to where your savings are today.
There are ways to work out how much you need to save to maintain your lifestyle – but remember that if you plan to spend retirement taking up an expensive new hobby or travelling the world, you’re likely to need more.
Gathering your paperwork and checking how much you already have saved, and the likely income this will produce, is a good starting point for understanding the gap you need to bridge.
Bear in mind that we’re living longer than ever before , and your lifetime savings may need to produce an income that will last for several decades.
However, your spending is likely to change in retirement.
You may have paid off the mortgage. If you’ve been a regular commuter, you’ll probably see your travel costs fall. Then again, staying at home more often may see energy bills rise.
Balancing the anticipated changes to your income and outgoings is one of the key factors in deciding whether you have saved enough to retire.
Look beyond your pension
You may have various assets you could weave together to form an income in retirement, so it is important to remember that you don’t need to solely rely on your pensions.
Alongside your pension pot, these could include money in Individual Savings Accounts (ISAs), as well as dividends from general investments and rental income from investment property.
Also, your savings may provide you with an income in various ways.
Since the introduction of pension freedoms in April 2015, you have more choice than ever about how you draw your retirement income. These removed the compulsion to buy a fixed income for life, known as ‘annuity’.
There are plenty of variables. Seeking expert advice can help take away any anxieties over how much you’ll need – so you can approach retirement with peace of mind.
The value of investments can fall and you may get back less than you invested.
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The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
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