Retirement. The word conjures visions of sun-drenched beaches, leisurely pursuits, and finally having time to focus on what truly matters. But before you reach this idyllic lifestyle, careful planning needs to be done.
Whether you’re just starting a career or nearing retirement age, taking proactive steps now can ensure you have financial security and fulfilment later down the road.
SETTING THE STAGE: DEFINING YOUR RETIREMENT DREAMS
What does your ideal retirement look like?
Do you picture yourself exploring ancient ruins in Southeast Asia, indulging in a lifelong passion for photography, or simply spending quality time with loved ones?
Defining your vision clearly and early on is crucial. It acts as a north star, guiding your financial decisions and shaping the very blueprint of your golden years. Not only does it give you an idea of what level of income you will need to upkeep, but it gives you an idea of what age you can expect to comfortably retire.
Like any plan, it is great to do this as early as possible. Let’s face it, we know that most 20-year-olds aren’t reading about and planning for retirement (beyond maybe a company pension), but it does make it easier if you are.
It is more likely that those in their 30’s, 40’s and (definitely) their 50’s are starting to see a clearer picture of where they would like to be.
It isn’t unusual at an early age to be unplanned, but at least start saving as much as you can. The more you save earlier in life, the easier your choices can be later in life.
THE EARLY BIRD CATCHES THE GOLDEN NEST EGG
The earlier you start, the more time your investment pot has to grow (and recover from market dips along the way).
Want to retire at 60? It should be easier to so if you start investing at 20 years old than it would be if your start investing at 40.
Investing just £100 per month for 40 years with 3% growth will give you more than £92,000. Investing the same amount for just 20 years will only give you around £33,000. In fact, you would have to save £279 per month to reach £92,000 by the time you hit 60*.
It is also sensible to take advantage of employer-sponsored pension schemes like auto enrolment workplace pensions and explore investment options to jumpstart your nest egg.
Remember, the sooner you begin the greater the financial cushion you could build for your desired lifestyle. An independent financial adviser will be able to help you make the most of any government-sponsored tax reliefs too (such as the pension Annual Allowance, ISA subscription limits, etc.) and other opportunities that come and go with the political landscape.
TAKING STOCK OF YOUR FINANCIAL LANDSCAPE
Before embarking on your financial planning journey, you need to thoroughly understand your current financial situation. Conduct a comprehensive analysis of your income, expenses, debts, and existing savings. This exercise creates a baseline and helps you determine how much you need to accumulate to support your desired standard of living in retirement.
BUDGETING FOR YOUR FUTURE SELF
While you may anticipate reduced expenses in retirement, don’t underestimate the importance of realistic budgeting. Healthcare costs, potential lifestyle changes, and unforeseen circumstances may require you to be flexible.
Analyse your current spending habits and create a realistic budget for anticipated retirement expenses. Consider economic factors like inflation, rising healthcare costs, and potential travel adventures. Remember, financial security breeds peace of mind and allows you to truly savour your retirement years.
Making the effort to save more now allows you to do two interesting things:
You’ll normally be able to hit financial goals earlier because you’ve saved more.
Living within your means and budgeting around a prudent savings strategy means you’ll cope better with a potentially lower income in retirement.
NAVIGATING THE PENSION MAZE
State Pensions provide a base level of income in the UK, but even the full State Pension is unlikely to be enough to cover your desired lifestyle. The Pensions and Lifetime Savings Association (PLSA) produces annual research indicating how much retirement can cost depending on your lifestyle. These “Retirement Living Standards” suggest the State Pension is almost £3,000 less than a single person needs for a “minimum” lifestyle (in 2024/25) – which is very basic.
To make sure your retirement can be comfortable, explore other options for retirement savings like:
Employers matching pension contributions.
Personal pensions.
Self-invested personal pensions (SIPP).
Lifetime ISAs.
Each of these options for retirement saving offers unique benefits. They also have their risks. You may want to speak to one of our independent financial advisers to find out the nuances of each. As professional advisers, we strongly recommend you seek independent advice to help you navigate the vast range of options available. Choosing the right path can make your retirement plans much more effective. Our experts can make sure you select the most suitable plan.
BEYOND THE NUMBERS: HOLISTIC WELLBEING
Planning for retirement goes beyond financial considerations. It’s about nurturing your overall wellbeing in mind, body, and spirit. Think about healthcare coverage options, suitable housing for your long-term needs, and fostering social connections through hobbies, volunteering, or joining community groups.
Will you stay in your current home, downsize, or explore retirement communities?
Planning for an active and fulfilling lifestyle beyond finances is essential for you to embrace the joys of your golden years. Consider this in detail as you enter the glidepath towards retirement, a few years before you hang up the boots (planning this when you’re in your 20s may be a little premature).
SEEK EXPERT GUIDANCE: INVESTING IN YOUR FUTURE SELF
Navigating the complexities of retirement planning can be overwhelming. Not only are there many options available to you, but each of these options also has options. The system is complicated, and your future financial success depends on you making good decisions now. A lot of responsibility has shifted away from employers and their company pension schemes to you as an individual.
By taking advice from an independent financial adviser, you can improve your overall chances.
ADDITIONAL TIPS FOR THE SAVVY SAVER
Make the most of online resources and retirement calculators: Tools like the government’s MoneyHelper Retirement Planner and the State Pension Forecast can provide valuable insights into your future needs and potential income. See our own Retirement and Lifestyle Planner (click this link)
Regularly review and adjust your plan: Life circumstances and goals evolve, so revisit your plan periodically and adjust it to stay on track to meet your evolving needs and objectives.
Stay informed: Keep yourself updated on changes in pension regulation, investment opportunities, and taxation rules to ensure your plan remains optimised.
Don’t be afraid to ask for help: Qualified financial advisers can be invaluable partners when navigating the intricacies of retirement planning. They help you make informed decisions.
Contact us to speak with an independent financial adviser in Glasgow. We can tailor your strategy, recommend suitable investment options, and ensure your retirement plan aligns with your:
Unique personal goals.
Risk tolerance.
Financial circumstance.
A qualified adviser acts as a valuable partner on your journey to a secure and fulfilling retirement.
REMEMBER
The value of investments can go down as well as up and you may not get back the full amount invested. The past is not a guide to future performance. Past performance may not be repeated. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.
It is important to take professional advice before making any decision relating to your personal finances. Information in this blog is based on our current understanding of taxation and can be subject to change. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask us for details. We cannot assume legal liability for any errors or omissions this blog may contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The information contained within this blog is for information only purposes and does not constitute financial advice. The purpose of this blog is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.
The Financial Conduct Authority does not regulate some forms of tax advice.