Retirement Income - Taking Aim
How much income will you need when you retire? This can be a very difficult question to answer when you know that your whole lifestyle is likely to change. The mortgage will be gone (hopefully) – the kids will be off your hands (in theory!) and there’s no more National Insurance to pay … But where do you start?
The first step is to work out the essentials. The utility bills and Council Tax will continue as usual. You’ll still need to eat and the car will still need to be taxed and insured. It’s fairly straightforward to calculate your minimum requirements and that will be your baseline.
Will you still be saving (and, if so, what for?) or is it time to start spending? What about healthcare? – Private Medical Insurance is getting more expensive, are you happy to rely on the NHS?
Then there are the lifestyle choices. How many holidays do you want? How much do golf lessons cost? Can you afford to learn to fly? How often do you want to eat out? Retirement will hopefully be an opportunity to live life to the full. You saved up to get there – now it’s time to enjoy it!
So you should end up with two target retirement figures – the minimum amount you need and then the amount you actually want. Now the real planning can start:
When will your State Pension(s) start and how much will they be? If you haven’t already done so, get yourself a State Pension forecast.
What pension benefits do you already have? What will they be worth at retirement? Are they guaranteed or do they depend on investment performance?
What other savings do you have? Are you likely to trade down when you retire? Will you inherit money in the future?
Then we come to the more difficult calculations:
What returns can you expect from the pension and savings plans you already have?
What about inflation?
How much tax will you pay?
How long are you likely to live?
Are you on target to get by or to enjoy retirement?
These are all areas where HDA can help – watch this space later in the year for the launch of our ProjectMoney app, specially designed to help our clients plan for retirement.
To discuss further or to arrange a face to face meeting please contact us.