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UK Retirement Savings: What's the Right Amount for a Secure Future?


When planning for retirement, think of the life that you want to live after you are done with working. How do you intend to spend your money?

What's the right amount for a secure future in UK retirement savings?

 

It can be quite stressful to figure out where to begin when it comes to saving for retirement, especially with concerns such as healthcare costs, mis-sold sips, inflation, etc.

 

Also, with so many factors to consider, from current expenses to future goals, it's easy to feel overwhelmed.

 

Making an easy-to-follow budget, however, can help you get started in the right direction. By understanding how much you need to save and setting achievable goals, you can take control of your financial future and work towards a secure retirement.

 

Creating a Retirement Income Plan

You must create a retirement income plan to safeguard yourself from experiencing financial challenges after you retire. Here's a step-by-step guide to help you create one.


What Is Your Current Financial Situation?


The first step towards implementing a financial plan is to assess the current state of your finances, which comprises your savings, investments, liabilities and income.


What Are Your Retirement Goals?


When planning for retirement, think of the life that you want to live after you are done with working. How do you intend to spend your money? Are you planning to travel a lot, move to a smaller house, or remain at your present level of consumption? The key here is to estimate how much per cent of your pre-retirement income you want to have when you retire.


Estimate Your Retirement Expenses


Estimate your probable costs after your retirement regarding shelter, medical care, transportation, entertainment, and any other expenditure you believe would be necessary.


Evaluate Your Retirement Income Source


List all possible sources of income after retirement, including your pension, personal/family retirement savings, savings and investments, rental income, and other income that you think can be potential source(s) of income after retirement.


Understand Your Pension, Both Private & State Pension

Check your State Pension age and when you'll be eligible to start receiving payments. The age is increasing gradually to 68 for those born after April 1977. You need at least 10 qualifying years of National Insurance contributions to receive any State Pension. 35 qualifying years are needed for the full amount. The full new State Pension for 2023/24 is £203.85 per week for those with 35 qualifying years. The basic State Pension for those who reached the State Pension age before April 2016 is £156.20 per week. Therefore, the State Pension alone is unlikely to provide you with a comfortable retirement income. It's meant as a foundation to supplement other retirement income sources like workplace or personal pensions, so you need to have a plan B! If retiring before the State Pension age, be prepared to have no State Pension income initially until you reach the eligible age, so this is very important to consider.


Don’t Forget Healthcare/Care Costs


If the retirement income plan should also consider the above aspects, it should include likely extra healthcare expenses and account for a long life expectation. It's important to factor in other costs, such as the possibility that you might need extra help with your care should your health diminish, possibly needing care outside of your own home, e.g. care home. If you do need this extra care, you will likely be required to contribute towards your care costs if you have assets, and care can be expensive. Also, ensure that you have set up power of attorney as well, as you never know what is around the corner, and not having power of attorney set up can cause all sorts of stress and difficulties during a trying time for you and your family.


Factor in Inflation


Realise that inflation can hurt your retirement income, so your purchasing power remains strong throughout retirement to plan. We've seen recently that rising inflation has a knock-on effect on your bills and food costs, so it's important to make sure you overestimate your requirements to be sure you aren't caught sort of funds for everyday expenses.


Seek Professional Advice if Necessary


It may be a good idea to consult with a financial professional or a retirement specialist to obtain professional advice when designing and implementing a savings for retirement income plan that suits your requirements and circumstances.

 

How Can I Increase My Retirement Plan?


Here are some tips on how you can increase your retirement plan:


1. Part-Time Work or Consulting


To supplement your income during retirement, consider working part-time or taking on side hustle opportunities. This can provide additional funds and keep you mentally and socially engaged. Look for opportunities that align with your skills, interests, and schedule preferences.


2. Consolidate Your Pension Plans and Consult Professionals


Consolidating multiple pension plans into one can simplify management and potentially reduce fees. It is advisable to seek guidance from a specialised Financial Adviser focusing on pensions and retirement.

 

They can create a retirement plan specifically for you, considering your age, risk tolerance, and retirement objectives. With this knowledge, you can make wise choices regarding your financial future and ensure your retirement funds work for you.

 

Seeking professional advice ensures you confidently understand retirement planning complexities, avoid pension misselling and secure your financial future. .

3. Downsize or Rent Out Property


If you own a larger home or property, consider downsizing to a smaller, more affordable residence. Alternatively, you could rent out a portion of your property to generate rental income.

 

Renting out or downsizing your house may allow you to lower your housing-related expenses and increase your retirement income.



Remember to plan for unexpected costs like medical emergencies and their knock-on effects, including the potential to stop any extra side hustle-type income you may be earning and the need to incorporate extra care needs into your budget, which may become more likely as you age. Also, consider how inflation can decrease the value of your retirement savings over time.

 

Make sure your initial savings are large enough to counteract this effect. Additionally, regularly review your retirement plan to adjust for changing circumstances, such as fluctuations in expenses or income. Having variety in your investments is also a good idea to reduce risk and increase possible profits.

 

Last but not least, if you run into any issues, get expert financial guidance to ensure your retirement plan is solid and customised for your circumstances.




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