In some rather worrying research in December, insurer Canada Life found that over 1 million workers in the UK believe they will never retire.
The research also revealed an array of other concerning statistics about UK adults’ later-life plans, including:
- 43% think their pension will not be enough to retire fully
- 34% are concerned they won’t be able to enjoy their older age due to work
- 33% are worried their health will deteriorate due to the need to keep working
- 22% are unsure whether their savings will last for their retirement, meaning they feel a need to work longer.
In years gone by, the traditional retirement was the “cliff-edge” style, in which people saved up during their working lives and then retired immediately after reaching State Pension Age.
But now, people more often choose to take a phased approach, perhaps cutting down their hours to part-time or working in a consultancy role.
Unfortunately, this research suggests that many people feel that a phased approach in which they continue to work in some capacity is not so much a choice, but rather a necessity.
So, what can you do if you’re one of the million who believe they’ll never retire? Read on to find out.
Work out your retirement goals
It seems rather strange to presume you’ll never retire without first establishing whether that is the case. So, your first step should be to crunch the numbers.
This starts with working out what you want to achieve in retirement. What are your goals for the future and when do you want to achieve them?
Whether you want to travel and explore the world, or simply spend time at home with your family and your grandchildren, you no doubt have a picture in your head of what you want to do.
These goals will likely be personal to you and your family. Make sure you take the time to sit down and discuss what it is you want out of later life.
Often, when retirement planning, people tend to start with the pounds and pence. But actually, it’s these goals that should determine how much you need, not the other way around.
Create a new retirement budget
Of course, just because your goals should be the driving factor in your decision-making, it doesn’t mean money isn’t important. On the contrary, money is the fuel in the engine that drives you towards your targets.
That’s why your next port of call should be to create a new retirement budget with your goals in mind.
This should include a comprehensive list of all your retirement income, such as your pension, against all your outgoings, including regular bills and any larger, one-off payments.
Remember to include an emergency fund as part of your budget, as unexpected events can have a serious impact on your income.
For example, when the Covid-19 pandemic began, stock markets around the world dipped. This would have seen many peoples’ pension funds fall with it, potentially reducing the amount of available money they had to live on.
In retirement, experts often recommend holding one to two years’ expenses in an easy-access savings account. This ensures that you always have accessible money to live on, no matter what happens.
Review your savings and pension contributions
Once you know what you want to achieve and how much you’ll need to do it, you’ll have a clearer picture of what your financial situation in retirement will look like.
At this stage, it’s possible that the numbers may suggest that you won’t be able to meet your targets at your current rate of saving.
That’s why it’s sensible to look at methods that can boost your retirement balance sheet, moving you closer to being able to afford your goals.
Reviewing your savings
Firstly, you may want to consider reviewing your savings plan. Do you currently save enough of your income? Or do you need to cut back on a few luxuries or unnecessary expenditures to improve your situation?
On the other hand, you could even be saving too much. If you hold too much money in cash savings, inflation could reduce its spending power in real terms, as the interest rate you receive may be lower than the rate of inflation.
As a result, you may want to think about moving money from savings to somewhere that offers greater returns, giving it a greater chance of keeping up with the costs of living.
Whatever you need to do, make sure your savings are appropriate for your needs.
Reviewing your pension contributions and other investments
Your pension is likely to be a key cornerstone of your retirement, so you may want to reconsider whether you’re making the most of it.
Pensions benefit from tax relief, potential investment returns and, if it’s a workplace scheme, employer contributions too.
In combination, these all make your pension an invaluable tool in helping you to get to the level of income you need. So, you may want to consider increasing your contributions from your current income to give your pension the best chance of providing you with what you need in later life.
Alongside your pension, you may want to look at any other investments you hold. Make sure that they’re still appropriate for you, both in terms of risk and reward, and that they’re doing what they need to do to move you in the right direction.
Work with a financial planner
If you’ve done what you can with your money and you’re still concerned that the amount you have means you’ll never retire, you should speak to a financial planner.
A financial planner can look at your entire financial situation and then make recommendations and adjustments, using your future goals as a basis for these decisions.
They can use cashflow modelling to show you where you currently are, where you want to be, and how you can get there by implementing their suggestions.
While you may have to pay for their services, this will be more than worth it if the financial plan they design for you means you’re able to live the kind of retirement you want.
If you’d like to work with a financial planner to give you confidence that you have enough live on in retirement, please get in touch with us at LightSide Financial Planning.
Fancy a chat? Email firstname.lastname@example.org or call 0151 372 0161.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator.