Planning for retirement might seem like a long road ahead and we know how hard it is to prioritise saving over spending.

When you’ve saved your entire working life, you just want to know that you will be “ok” financially when you eventually stop.

We think it’s important to have a plan in place and it’s never too early to start!  We love working with our clients to help them do all the things they want to do in retirement.

Here are 5 things you might want to think about:

  1. Not being honest about what you need

We encourage our clients to focus on this first and work from there, typically this involves completing the dreaded expenses questionnaire!  To be honest, once they start the process, they find it incredibly helpful. It comes down to what you want your life, post work, to look like.  Ask yourself 1. Business or Economy? 2. 1 holiday or 5?  3. Eating out once a week or once a month? There is no point in planning ahead and underestimating what you spend.  Your bills post work are likely to be very similar to your current spend unless you are repaying your mortgage for instance or funding further education.

  1. Spending Too Much Too Soon

The good news is that we’re all living longer, the bad news is our savings need to last much longer too.  Data from the Office for National Statistics shows that an average 65-year-old living today could expect to live for a further 22.8 years.

So, when can you start to take money out of a pension arrangement?

As life expectancy increases, so too does the age at which you can access your savings. You can currently start withdrawing your workplace or personal pensions from the age of 55, however it’s expected to go up to 57 by 2028.

It all very well to retire and start spending but you need to keep some resources in reserve, so you don’t end up dependent on government benefits or become a burden to your children. A clear retirement plan is where we can help to ensure you don’t ‘run out’ of money.

  1. Believing your State Pension will be enough

Whilst it’s great that we have a State Pension system (and hopefully this will continue), if that’s all you are relying on, you won’t exactly be booking that Mediterranean cruise! The current state pension amounts to £164.35 a week, which is the equivalent of £8,546.20 a year.  If you think you can live comfortably on this sum then that’s great but if not, you need a plan to fund the gap.  The intention is not to scaremonger but, there is a chance that successive governments will revise the State Pension system so it’s worth not being overly dependent on it.

  1. Too Little Too Late

One of the biggest misconceptions about pension saving is that you can put it off until later. The earlier you start the more money you’ll end up with. And, the later you start saving the more you’ll need to put away each month to make up for it. Scottish Widows did some research that highlighted that the older a person is when they start saving, the more significant their contributions will need to be. To save enough to receive an annual pension of £23,000 a person would need to save £293 a month at 25 and £433 a month at 35. If they put it off until 45 they’d need to save £724 a month and £1,445 a month at 55.  Wow, that’s a lot to start saving if you are not used to it!

  1. Not planning for long term care.

Usually the “elephant in the room”.  None of us want to go into care but most care homes are pretty full! Worth thinking about.  Unless your assets are less than £23,500 (and yes, this includes your home) then you are responsible for paying for your care unless your needs are so severe that you are entitled to NHS Continuing Healthcare.

It depends which part of the country you live in and the quality of the establishment, typically we see care fees of at least £650 per week in the North East – average stay 4.5 years.  Many people think that it is unfair that their savings will be used for care, however, being a self-funder gives you choices that others don’t have.

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