Retirement might seem like a long way off, but it’s important to start a savings plan as soon as possible. The amount of money you’ll need for retirement will be more than you can feasible save in a short period, and to ensure that you can live the lifestyle you want when you retire, you’ll need to work out exactly how much that is.
This does not constitute advice and advice should be sought in all instances before acting on it.
Secure your retirement lifestyle
New figures from the government show that the average retired UK couple has a pension income (including occupational and private pensions but excluding State Pension income) worth £284 per week. Now, if you are close to retirement and your weekly income target is similar to this number, you could buy a ‘level’ annuity to guarantee this income for life. Keep in mind this number might not hold the same value in a few years thanks to inflation and you will need to have amassed £267,000 in retirement savings already.
If you have a lifestyle in mind that’s a bit more extravagant, like the top fifth of pensioner couples bringing home £704 per week, you will need a savings of £660,000 to secure the same type (level) of annuity to guarantee that income for life. However, if you’d like an annuity that increases in line with inflation, you’ll need to search for an ‘index-linked’ annuity and the savings you bring to the table will need to be significantly higher.
The good news is that no matter which kind you go for, annuity rates are rising, which means that savers have the opportunity to earn even more from their savings. Plus, over the last decade, pensioner’s income has increased in real terms. So while it might be tempting to prioritise short-term saving, keeping up with your long-term pension savings is still crucial.
Maximise your savings potential
Take the time these economic conditions have presented you with to ensure that you are still on track to meet your financial goals. Here are a few simple ways to ensure you’re saving as much as possible:
Keep a close eye on your bank account — It’s common to sign up for a free trial or with the intention to close an account after a certain period and just forget to cancel. Review your regular direct debits to see if there are any superfluous debits you can get rid of.
Clear outstanding debt — During times of high inflation, interest rates are usually high right alongside it. If you don’t have a fixed-rate mortgage this could mean your monthly repayments increase, so it’s best to attempt to pay down any and all outstanding debt to avoid overpaying in the long run.
Create a budget and stick to it — Besides maintaining a budget for your everyday expenses, it’s important to keep one for larger purchases as well. If there’s any chance that a large purchase could impact you negatively, it’s probably best to put it off until your finances are in a better place. On the other hand, if the current economic conditions are perfect for making a big purchase, prioritise spending your money so you can complete your purchase.
Ensure you stay on track
If you need help getting or staying on track toward your financial goals, we can help. We’ll ensure your retirement plan is sound and that you follow the steps necessary to get there. To guarantee your retirement is all you dreamed of and more, contact us to discuss your retirement plan.