It’s only natural to worry about how you will fund your retirement. Indeed, a study from Aviva found that almost three in five (59 per cent) UK adults are worried about having enough money to last them in retirement. On the flip side, only a fortunate 13 per cent have no worries in this regard.
Given that this is something that the majority are concerned about, it’s important to consider what we can all do to combat the financial fear of retirement.
Here’s what you can do:
Understand what the state pension is
Be honest, do you really understand how the state pension works? Or exactly how much you can claim and when? One study found that a massive 85 per cent of people don’t understand this, so it’s fair to assume that the vast bulk of us are in the dark.
While the full new State Pension is £159.55 there’s a little more to it than that. Everyone should spend five minutes clicking through the Government’s latest advice so that they know what they are eligible for.
Top up your pension pot
Most of us look at our pensions the wrong way round. Instead of assessing how much we want to set aside, it’s more important to think about how much you’d like to have as an income in retirement and then work out how much that would require you to save.
Which? conducted research which found that couples enjoying a comfortable retirement spent about £26,000 a year, while those having a luxury retirement spent £39,000. The price of an index-linked joint-life annuity for these incomes would be £370,000 and £550,000 respectively.
Whether it’s paying more into a work pension or taking out a private product to invest more, knowing how much you need allows you to research your investment options with a level of certainty.
Make your money go further
When weighing up your retirement pot, it pays not to just think about your pension. Try to make the savings you have work as hard as possible. That might mean a bit of work in the current climate – in which traditional bank and building society savings accounts have very low interest rates. Research investments that you are comfortable with to make your money go a little further. If you’re a little nervous, you could even try a forex trading demo account to test out your new-found knowledge of markets you were not previously familiar with.
Have honest conversations about the future
Don’t tiptoe through your 50s failing to tackle the big issues. Review everything, from the house you live in to the car you drive and consider if there are any changes you’ll want to make in retirement. Many people find that downsizing can free up funds to spend on a comfortable retirement, while also being a practical step to adapt to the circumstances of retirement. Tackled early enough, this doesn’t need to build up into a big deal. Don’t see it as a negative – focus on the positives you can get from downsizing.
Make a budget plan
So far, we’ve dealt largely with the broad brush planning that you need. After that’s done, it’s time to be specific. Draw up a detailed budget plan, outlining what you need to spend on essentials. Having a plan in place will give you a clear idea of what you have to spend and gives you the confidence of having a plan to stick to. Fear of the unknown is what drives a lot of our retirement money worries, this can ease that.
