Retirement is something that many people start to worry about as they reach the end of their career. Although it is really sensible to start planning really early, any planning is sensible. There are a series of steps that you might like to take, in order to make sure that you have a comfortable retirement.
- Calculate what you need
It sounds quite simple to just calculate how much money you will need in retirement, but it is actually pretty tricky. Your needs will change, but that does not mean you will spend less money, you may actually spend more. For example, if you continue living in the same house, then costs of staying there will remain the same but if you are home more, then you may need to have the heating on more and you may need it set to a higher temperature as you get older. Being free to do more, you might want to go on more holidays or generally travel more, which will cost more money and you might also want to join more clubs and groups so you do not miss out on the socialising that you will have been used to at work. You may also need to pay a cleaner and gardener to help you out and eventually you may need a carer as well. You will not be able to get a loan easily, if you do not have a conventional income either and so you may want to think about having a sum of money behind you to pay for things like new cars, house renovations or repairs, holidays etc.
- Calculate what you will get
The next step is to calculate where you are at with your possible pension payments. It may be that you have been contributing to a government pension through National Insurance contributions and if this is the case you will be able to go to the governments website and find out how much you will be entitled to get when you retire. This figure may assume that you continue to pay in, so don’t take it for granted that you will get this amount as if you do not continue to work and contribute you may not.
You mayalso have money due from
work pensions. If you have had any jobs then you may have paid into pension
schemes with those employers. You may not have been employed for very long, but
even so you may have contributed to the pension scheme and be due some money
back. Try to find out the details of each of these and find out how much you
may get from those.
You may also have paid into some private pensions and these could give you some income as well. You should be aware of these and you will be able to add anything that you get from these into your expected income.
You may have other investments that you hope to use towards your retirement income. This might be rental from a second home, a managed fund which will pay an income, investment in a business or something else. Make sure that you include these as well.
- Research ways to make up any shortfall
Once you have worked out what you feel you will need financially in retirement and what you feel you will get, you will then need to think about how you might cover any shortfall. Some people might just decide that they will have to continue working or they will massively downsize or hope that they can get a council house. However, these options may prove to not be possible or to be very difficult. It is nice to think that we might have an enjoyable retirement where we can afford the things that we want and have a nice lifestyle. As long as you are not really close to retirement, it should be possible to be able to achieve this if you come up with a decent plan.
You will need to start by looking at your current income and expenditure. Work out how much money you have coming in and where from as well as how much you spend and what on. This can be quite a big task if it is not something that you have done before but it is always worth being in touch with your personal finances anyway.
Once you have sorted through this then it will be time to think about what your goals will be, both short term and long term. You may wish to do some or all of the following. Pay off loans, top up savings, make new investments, take out a private pension or pay more into existing pensions. It is not always obvious what might be the right solution though. If you are not sure, then it could be a good idea to pay an independent financial advisor to help you with the decision and they will be able to look at your situation and let you know what they would recommend in order for you to get yourself into a good financial position.