Retirement planning for every stage of life

For most, planning and preparing for retirement can be quite abstract. I know far too well that the average day-to-day can come at you fast, where you give precedence to all of life’s short-term needs and wants and you park any difficult thinking about your future self for another day. Yet those who do take time to better understand what they currently have in place and what life they do want for themselves when you clock out of work for the last time are the ones who benefit the most.

To that end, rather worryingly, the Pensions and Lifetime Savings Association (PLSA) have found that only 23% know how much they need to save for retirement which, when you consider that 38% of people are not on track for minimal and basic retirement standard set out by the PLSA, indicates that this is a ubiquitous issue for a lot of people in the UK. As such, I will set out some useful pointers to consider so that you can successfully navigate the difficult path to the retirement you deserve. 

Early accumulation phase (20s & 30s)

At the advent of your career, thinking about life at 65+ is not necessarily your most pressing concern. But getting familiar with the process of budgeting and planning for specific activities and life events goes a long way, so that you can effectively allocate how much needs to go in separate savings pots. Whilst this is true for any age, defining what you’re doing in the short, medium, and long term can help visualise something to aspire to and motivate you to meet those goals. I’ll set out a few examples of what these may be below:

Short-term: emergency fund, holidays/travelling, educational or professional qualifications.

Medium-term: purchasing your first home, starting a family or a change in career.

Long-term: retirement.

When it comes to investing, a perennial truth is that starting early gives you the best possible chance of successfully hitting all personal milestones and avoiding having to pay too much further down the line to do the things you enjoy. Due to the effects of compound growth over the long term you can buy a pool of investments for a much cheaper price than what you will in many years to come as businesses and economies grow. Pensions are oftentimes overlooked as a result of more pressing demands at a point where your pay is most likely going to be lower than what it will be further down the line, but there are a few things you can do to ensure your pension reaches its maximum potential.

A great starting place is understanding what your employer puts into your pension, if they match contributions up to a certain point then setting this as high as possible will certainly do no harm – at the end of the day it’s free money to you. Indeed ‘to err is human’ and we can all be susceptible to ‘lifestyle drift’ to a certain extent, so with each new promotion or pay rise should come a small increase to retirement pots whilst you maintain all your liquid needs and manage debt, if relevant, sustainably. And finally, given people at this stage of their lives won’t be able to access private/employer pensions until 57, you could afford to take a higher degree of investment risk (in line with what is suitable to you) due to the lengthy period before these funds become accessible.

Another step you can take early on, or at any point on your retirement planning journey, is to track down and consolidate your lost pension pots. According to research, the average Brit will have 11 different jobs during the course of their working life, which can soon add up to a lot in ‘lost’ contributions. But with our new Find, Check & Transfer service, we’ll take all the hassle out of finding your lost pots and consolidating them all in one place. You can find out more about the service on our dedicated page here.

Peak growth years (40s & 50s)

As time goes on it’s beneficial to take a step back and assess whether you’re aligned with your goals. If you haven’t thought about retirement yet, what does this look like? What is your current financial situation, what are your savings pots and do you have any outstanding debts?

Once you have this primary underpinning of what lifestyle you’d wish for in retirement, whether this is something a lot more low-key and modest or a much more luxurious retirement filled with the finer things, you can then control how to allocate your savings and expenditure. You can see whether you need to make up time quickly and contribute heavily to your pension, or realise that the shrewd contributions made many years back has left you in a good position to enjoy your hard-earned money in other areas of your life. 

In these years, familial arrangements will have changed for most, be it the introduction of young members to the family, additional care being required for parents, or both. With this comes more financial responsibility which can put a strain on your propensity to save. Equally, however, these are peak earning years for most where there is a greater opportunity set to save additional cash for future you. 

Aside from this, there are other considerations which are correspondingly important. For example, checking your National Insurance record to see if there are any gaps which need filling so that you are able to benefit from the full state pension. Taking time to consider your own, and those closest to you, health will be at the fore for a lot of people here too. If you haven’t already, check what work benefits are available to you when it comes to life insurance – do you need to continue, re-evaluate or introduce this should the worst happen? Will you or a family member need to rely on private healthcare in the years ahead, if so, how much does that cost?

If you have any lost pension pots you need to take track down, be sure to take advantage of our new Find, Check & Transfer service. For a small fee, we’ll do all the hard work for you, so you can track and consolidate all your old workplace pensions, putting them in one easy-to-manage pot, giving you greater control and visibility over your retirement saving plan. 

Making sure you also have a will in place and, for pensions, an expression of wish document also allows for you to explicitly set out how your assets will be distributed to your beneficiaries upon your passing. In the same vein proper planning should make the process a little easier at what will be a difficult time for them.

Depending on whether you are aiming for an early or a later retirement will have a huge sway on your pension’s investment risk strategy so seeking professional guidance is always the best way to make sure your ducks are in a row. 

End of accumulation period (60s)

As you approach retirement, you should begin to have a clearer idea of the granular details of retirement plans and its resulting costs. If not, you can consider living costs, healthcare, travel & leisure, and financial support for family members as an effective springboard. If you haven’t reviewed your retirement plan in a good while, then a changing family landscape may mean your previous plan is out of date and perhaps it serves as a reminder that you can always fine tune an existing plan. 

Take time to reflect on your retirement goals and consider how you wish to best enjoy yourself at this phase of your life, balancing potentially initial higher spending as you’re more active with reduced costs later on. 

Determine your retirement age and decide whether you will retire fully or make the transition gradually over a number of years. You can identify your income streams you have available to you and, if you think you may fall into the category of people who will find the abrupt end to working life challenging, then you may be better suited to picking up consultancy work or part-time employment

Consulting with a pensions expert can help clarify your retirement options, such as choosing between flexible access drawdown (FAD) and annuities, and deciding on the order in which to use your various financial pots, both within and outside your estate, to utilise the gifting of assets to any potential beneficiaries. In line with this, reviewing wills, expression of wish documents, powers of attorney and considering any potentially exempt transfers can come in particularly useful. 

Last but not least, given you may be close to using your pension funds, you may consider de-risking your pension investments so that you can help stabilise your pots against too much market volatility whilst still maintaining its growth potential. This again can be discussed with a pensions expert.

As previously mentioned, you’re not alone if you find it difficult knowing which direction to turn when planning for retirement. Hopefully the points raised above can begin to piece the puzzle together but, as ever, we are on hand to answer any questions which you may have. You can book a link here to speak to a member of our team.