Millions of UK adults are heading toward retirement with little more than a hunch to guide them on how much they will need, new research from Standard Life’s “Retirement Voice” report reveals. So what are their top tips to ensure a secure retirement?
According to their latest research, one in six of us (16%) say they’ve relied on guesswork or gut instinct to determine how much will provide them with a financially secure retirement.
Concerningly, almost two in five (39%) admit they’ve not worked out how much they’ll need at all.
This includes 43% of Generation X and 34% of Baby Boomers – many of whom are approaching or past state pension age.
The risks of such uncertainty, say Standard Life, are clear, with nearly half (47%) of those surveyed worried their retirement savings won’t stretch the full length of their retirement – including 31% of Baby Boomers.
Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group, said: “Planning for retirement can feel daunting, and with so many factors at play it’s not surprising that people often resort to guesswork.
“Part of the challenge is that calculating how much you’ll need involves a lot of moving parts – inflation and your expected retirement date are considerations, as are your lifestyle goals and any additional income sources. Without the right tools or support, it can be difficult to know where to start.
“Connecting with your future self can be an issue too. Retirement can feel very distant, especially when you’re busy judging the demands of everyday life. It’s tempting to put retirement planning off or assume it will all make sense in the end, but the delay can be costly.
“The good news is that help is available and with a few small steps, like regularly reviewing your current level of savings and using an online pension calculator, you can start to build a clearer picture of what you’ll need.”
Tips to secure a comfortable retirement
Dean Butler shares four top tips on how best to prepare for retirement and estimate how much you’ll need to save:
1 Think about when you want to retire
The State Pension forms part of most people’s retirement plans, and the age threshold for this is currently 66 (but will rise to 68 from 2026), so it’s important to be aware of the date that you’ll receive money from the Government as this can be an important source of income.
You should also check that the retirement age you have in mind is the one on your pension plans and see if it’s possible to update this if it’s different, as this will help give you up to date information about your retirement choices.
If you’re part of a workplace pension scheme, your retirement age may have been selected for you by your employer. You can normally change this, but this can impact your investments, so check with your employer for more information.
2 Get to know your retirement options
Deciding how to take your retirement savings can be one of the more confusing decisions to make. You can normally take your money as flexible income (drawdown); as one or more lump sums; or use it to buy a guaranteed income for life (an annuity).
You can also combine these options to suit your needs. You should check with your provider that your pension plan offers the options you want, and if not, you may need to transfer to another provider, although this won’t be right for everyone. Deciding how and when to access your funds is important, so you may wish to get expert advice to help.
3 Establish how much money you might need when you retire and what you’re on track to receive
How much money you will need in retirement will depend on your planned lifestyle and goals. For example, you might want to go on holidays abroad, do some home improvements or pick up new hobbies, and it’s really important to consider all of these factors to establish what you’ll need to pay for when you stop working.
The Retirement Living Standards provides a good place to start when you have this information, providing a guideline of the retirement pots needed to fund a minimum, moderate and comfortable retirement lifestyle.
4 Check that your savings can support your lifestyle
You’ll then need to think about whether your savings can support your ideal lifestyle. You should start by checking the value of your pension plans, and what they might be worth in future, which you can do using a pension calculator. Some people supplement their pension savings with things like income from part-time work, rental properties, or other savings, but everyone’s circumstances are different. Thinking about your own financial situation and planning accordingly can help you make sure your money lasts for as long as you need it to.
Ensuring a secure retirement shouldn’t be guesswork…
The one simple way to ensure you will have enough to retire on comfortably is to use your RetireEasy LifePlan – the most sophisticated retirement planner currently available to consumers.
Feeding in all of your relevant data takes just a few minutes and it will provide an instant snapshot of whether your plans are on track. You can then return to your plan at any time in the future to update your figures or check out different scenarios should your circumstances change.
The RetireEasy LifePlan costs from just a few pounds a month – and if your subscription has lapsed it can easily be renewed.
