Research shows people about to retire spend more time buying a car than planning their retirement.
Retiring is seen as a care-free, relaxing period in life – where you can wave goodbye to the hassles of working and put yourself first. But if you don’t make the most suitable financial plans, unfortunately, retiring could actually prove a struggle.
It’s not just about how much you save towards your retirement, but the decisions you make around using your pensions, and other pots of money, to fund your lifestyle. A bad choice can have long-lasting repercussions. The 2015 pension freedoms give you more flexibility, but also puts more onus on you to get it right.
A time for planning
In your final decade of working life, you realistically need to increase your focus on your retirement financial plans. Yet September 2018 research by Legal & General suggests that’s not really happening.*
Amongst their survey of over 55’s, 32% are spending less than a week, collectively, on making a decision arranging an income from their pension. This includes researching their options and understanding which products represent good value. Yet 40% admit they would spend more than a week planning and making a car purchase.
Almost one in four were unable to say what rate would represent good value for money on their investments or savings. 18% aren’t confident their pension savings will last them.
The last point is crucial. Life expectancy from birth has significantly risen over several decades. If you reach 65, you can on average expect to live to 83.6 (men) and 85.9 (women).**
Whereas previous generations would realistically only get to experience a relatively short retirement, yours could last for two decades if not longer. Your retirement could be defined by the decisions you make just before, and at the point of, finishing working. It needs much, much greater thought than planning your next car purchase.
What do you need to consider?
In your final decade of working, you especially need to focus on planning your retirement. As a starting point you might want to consider if you can afford to pay into your pension. And, crucially, check if you’ve invested in a way that’s appropriate for you – for example the level of risk you’re taking.
To help decide this, you need to develop concrete thoughts on what you want to achieve in retirement, and the type of lifestyle you hope to fulfil. Knowing this could help you to think about how you will use your pension to fund retirement, and the options available to you.
As a starting point you might want to consider if you can afford to pay into your pension.
Ultimately, your money needs to last you throughout retirement – and should take into account the possibility your circumstances could change. That’s difficult to forecast. But by speaking to a financial adviser, you can benefit from an expert working with you to plan your future. They can support you in devising a strategy that aims to set you up for the retirement you deserve.
*https://www.legalandgeneralgroup.com/media/2693/24092018-over-55s-spend-more-time-on-car-than-pension.pdf ** https://www.ons.gov.uk/peoplepopulationandcommunity/ birthsdeathsandmarriages/lifeexpectancies/bulletins/ nationallifetablesunitedkingdom/2015to2017
The value of your investment can go down as well as up and you may not get back the full amount invested. Investments do not include the same security of capital which is afforded with a deposit account. Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits. Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.