Are you leaving your retirement planning too late?

Travelling the world, spending more time with the grandchildren or finding a place in the sun to call home are examples of the dreams people have for their retirement years.

However, the highest cost of living increase in 40 years, caused by elevated energy, fuel and food costs, has led to a sense of uncertainty with many, understandably, shifting their focus from future aspirations to making sure they can get through the next few weeks and months.

Hopefully, this will only be a short-term problem but how can this impact saving for your retirement and when should you start planning for your retirement?

Retirement Planning – facts and figures

Recent calculations by the Pensions and Lifetime Associations (PLSA) found that to have a ‘moderate’ retirement living standard, which includes things like a two-week holiday in Europe and frequent eating out, a single person would need an annual budget of £20,800, up £600 from 2019, and a couple would need £30,600, up £1,500 over the last 2 years. This rises to £33,600, for a single person, and £49,700, for a couple, when a ‘comfortable’ retirement living standard is required.

So, what does that mean for future retirees? Well, it’s simple mathematics that the longer you’re saving for a pension, the more sizable your pot of money is at the end. Equally, start too late and you’ve only got a short amount of time to build the funds you require to retire.

This can lead to problems later in life as you try to adapt to the shortened time frame to increase this retirement pot. You may work a number of years longer, and change the way you live to help put more money away, such as giving up on the luxuries or even scaling back your dreams to help fit around the money you have saved.

This isn’t an uncommon issue and recent findings by Hargreaves Lansdown found that only 1 in 7 started planning for their retirement between the ages of 18 and 24, rising to 1 in 5 during the ages of 30-39. The same study found that 1 in 5 would be leaving any thoughts of retirement planning until they’ve turned 60.

Understanding the importance of a pension

A lack of financial knowledge and education about pensions can be the main contributing factor to the discrepancy between the money needed to be saved and the timeframe to save it. In fact, according to Portafina, 40% of working adults wish they had been taught about pensions and the importance of saving money as a young adult, during their school years, with general investing knowledge and saving methods also being high on the list.

This is supported by a recent survey by Drewberry, based on workplace pensions, which found that 41.5% of those weren’t aware of what they were paying in and 58% wanted a better understanding of what they need to do to be prepared for retirement.

Getting retirement ready

Whatever age you’re starting, the most important thing is to start. There are a number of ways in which you can start thinking about retirement planning.

It’s never too early to start preparing for retirement so the most important thing to do if you’re taking that first step, is to start saving. This can be done with regular payments, which can be adapted based on your circumstance. A pay rise can see your payment increase, whilst an unexpected car breakdown may see contributions decrease for a month.

If you’re a bit further along, have an established pension pot and see retirement on the horizon but are unsure of your options on getting there, it’s important to speak to someone to understand your options and create a strong plan which fully utilises the money you’ve worked hard to save.

Paul Darley, Managing Director of Wealth Experts, says, “One of the most frequent questions we get asked is, ‘Have I enough to retire?’ Whilst this figure is different for everyone, certainly, most couples would aspire to two weeks on holiday each year and living comfortably day to day in retirement.

If an annual income of circa £50,000 is needed to achieve this, then the earlier people can plan then the better. What people are usually shocked by is that they need to build a retirement pot that will potentially last them 30 plus years and this requires a strong financial plan in order to achieve this.”

If you need any advice on your retirement plans,  the Wealth Expert team, are here and happy to help.