How Good Is Your Retirement Strategy

JLWealth GoldEgg

With the UK’s increasing life expectancy and advancements in healthcare, it’s now not uncommon for people to live for twenty to thirty years after they retire. The average UK pension pot, including money from state and private pensions, savings and investments, is now around £50,000, with men tending to save nearly three times as much as women.

However, 56% of people have admitted they do not know how much their retirement income will be in old age. Ensuring an adequate income for life requires careful planning, so how can you tell if you’re being realistic about your retirement planning or deluding yourself? Here are some ways you should be preparing:

Create a plan and stick with it

To ensure you meet your target retirement income, you need to make sure you have a pension strategy that matches your desired level of risk. Ideally, you want to invest in a diversified mix of different asset types; it’s important to create a balance between high and low risk investments that meet your attitude to risk but also give you the potential to reach your goals.

You also need to set a level of savings that will leave you enough income to maintain your current lifestyle but also meet your target income for retirement.

Once you’ve set out your investment strategy, you need to stick with it and resist the urge to constantly jump on the latest bandwagon.

Check your plan’s performance regularly

Saving regularly is obviously the foundation for a secure pension, but it’s important to regularly monitor the performance of your pensions and investments and make any amendments necessary to ensure you’re staying on track for retirement.

Most pension providers now give you online access to track your plan’s performance, so make sure you have set up online access. Using an online pension calculator, like this one from Money Advice Service, can help you to forecast your likely retirement income and identify any shortfalls in your target retirement income.

The government has recently announced changes to the state pension age; if you’re not sure at what age you’ll be able to receive a state pension, you can check on the gov.uk website.

If you’re not likely to meet your retirement income targets, you can start saving more or invest differently. If your savings and investments are not so straightforward and it’s difficult to conduct this sort of evaluation on your own, it’s a good idea to consult an expert adviser. Failing to keep on top of your retirement plan could leave you short of the resources you need to maintain your standard of living, or could mean that you have to work longer than you planned.

Don’t count on working longer

Spending a few more years working past the traditional age of retirement can significantly boost your retirement prospects, both by giving your nest egg more time to grow and reducing the number of years you’ll be reliant on your savings. Similarly, continuing to work on a part-time or contract basis once you have retired, can help to improve your level of income.

The trouble is, even if you plan to extend your career, you may not have that option once you get to it. Health problems or disabilities can result in you having to stop working earlier than planned, as can having to care for a spouse or other family member. And if you are made redundant, it can be difficult to find a new role once you are past retirement age.

So while working longer can give your retirement income a welcome helping hand, it’s not a good idea to base your current level of savings on the assumption that you’ll be able to work as long as you like. If it turns out you’re not able to do so, you may be left with no choice but to dramatically scale back your standard of living in retirement.

Have a plan to turn your savings into income

Building up your nest egg is only half the job of ensuring a successful retirement; you’ll also need a comprehensive income plan, including your expected retirement age, a budget for likely expenses and a reasonable rate for withdrawals. Where previously you had two ways to do this; pension drawdown or buying an annuity, changes in legislation mean you now have far more options, including taking the entire pension pot as a tax-free lump sum.

Ideally, you should begin developing your plan around five years before you expect to retire. It can be difficult working out exactly what combination of options will work best for you, so it’s generally a good idea to consult an expert adviser at this point.

Get expert advice

While the above suggestions are great ways to keep on top of a fairly straightforward retirement plan, more and more people are choosing to supplement their pension pot with other savings products, investments or property. Working out the financial and tax implications of these options, both in the present and the future, can be extremely complex.

It’s also important to make decisions about life assurance provision, plans for long term care and medical insurance, to make sure you’ll maintain a high quality of life throughout your retirement.

If you have your own business, you’ll also need to plan what will happen to it when you retire and make sure you have the best possible exit strategy.

The advisers at John Lamb Wealth Management have the expertise to guide you through the range of investment strategies appropriate for your situation and aspirations and help you plan a secure financial future. We also have the technical expertise required for consolidation projects if your pension arrangements are more complicated. 

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