1. Make sure you have a retirement plan in place
One of the first steps you should take when planning for retirement is to ask yourself what your ultimate goal is.
You’ll probably already have a rough idea of what you want from your retirement. That’s why, if you haven’t done so already, now is the time to put them into a proper plan.
Here are three questions you should ask yourself:
When do I want to retire?
You probably have a retirement date in mind, based on when you want to retire or when you’ve calculated that you’ll be able to afford it. As you approach this date, you should assess whether it’s still viable and whether you will be moving into retirement gradually through reduced working hours, part-time working or consultancy.
Have your circumstances changed since you last reviewed your plan, such as receiving a windfall or having to cover an unexpected expense?
Do the changes mean you need to defer the date of your retirement? Or do they mean that you are able to stop working sooner than you’d previously thought?
What do I plan to do in retirement?
A study by Aviva has shown that travel is the most popular activity planned by people approaching retirement. This is followed by taking up a new hobby, or spending more time on an existing one, and supporting children and grandchildren.
Having an idea of what you want to do will give you a decent sense of how much income you’ll need in retirement. If you want to travel extensively, this will mean you’ll need a much larger pension fund than if you’d rather spend your retirement playing golf and working on your allotment.
If you do need a larger fund, you may need to push your retirement date back or increase your pension contributions or work part-time.
How long will my money need to last?
Current figures from the Office for National Statistics show that the average man lives to an age of 84 and the average woman to 86. So, if your current plan is to retire at 65, your retirement is likely to last around 20 years, which means your pension fund will need to support you throughout that time.
You may want to consider putting together a current cashflow plan which lists all your regular monthly outgoings, as well as noting any anticipated big future expenses. Then, do the same exercise based on what you want to do in retirement.
Depending on what you want from your retirement, it’s likely that you’ll spend less than you do now. Putting together a detailed plan can help you to determine whether your current pension fund will be enough to support your desired lifestyle in a sustainable way.