How much to retire page

When should I stop working?

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A mature couple looking at paperwork to for see if they can take early retirement

Do you have enough income to retire? Are you prepared for the life changes retirement will bring? Is this the right time to sell your business Is your timing right or will your savings and investments be at risk from volatile market conditions?

The best time to retire will depend on a variety of factors, including your health, your financial situation and your personal preferences. If you’re in good health and you have a solid financial foundation, you may be able to enjoy a long and active retirement. On the other hand, if your health is declining or you’re struggling to make ends meet, early retirement may be the best option.

Spending power each year

Ultimately, the decision of when to retire is a personal one. It’s important to do some soul-searching and research before making a final decision. Once you’ve decided when the right time for you is, be sure to plan carefully to make the most of your retirement years.

Some people may now need to think about the impact that inflation could have on their retirement income, and to consider whether they can afford to retire yet. Rising inflation can wipe years of retirement income off pension pots as savers must increase the amount they withdraw to maintain the same spending power each year.

Impact on retirement plans

Inflation can have a significant impact on your retirement plans. If inflation is high, the purchasing power of your savings will decrease
over time. This means that you will need to save more money in order to maintain your standard of living in retirement.

To offset the impact of inflation, you may need to adjust your retirement plans. For example, you may need to save more money so that you can maintain your standard of living in retirement. Additionally, you may need to invest in assets that are less vulnerable to the effects of inflation. Bonds are one type of investment that can help protect your portfolio from inflation risk. In general, they can offer relative stability, but you need to take your age and risk tolerance into consideration.

Potential effects of inflation

While inflation can have a significant impact on your retirement plans, there are steps you can take to offset its effects. By saving more money and investing in assets that are less vulnerable to inflation, you can help ensure that your retirement plans remain on track. Additionally, by being aware of the potential effects of inflation, you can make adjustments to your plans as needed to account for its impact.

As you get closer to retirement, it’s important to start thinking about how inflation could impact your plans. While inflation can be a good thing if it leads to higher wages and increased economic activity, it can also be a problem if prices start rising faster than your income, as we’ve seen this year with inflation reaching a new 40-year high amid a cost-of-living squeeze.

There are some general principles that can help guide your thinking on this important topic:

The first principle is that it’s never too early to start planning for retirement. The sooner you start saving and investing for retirement, the more time your money has to grow. This is due to the power of compounding – which essentially means that your money earns interest on itself over time.

The second principle is that retirement planning is not a one-time event. Your retirement timeline will likely change as life circumstances change. For example, you may need to adjust your timeline if you have children or other family members who depend on you financially.

The third principle is that retirement is not an all-or-nothing proposition. You don’t have to retire completely in order to enjoy a comfortable
lifestyle in retirement. Many people choose to work part-time or pursue other interests during retirement instead of (or in addition to) simply
sitting around and doing nothing.

Time to utilise cash flow modelling?

Planning for retirement is a complex task, made even more difficult by the fact that most of us don’t have a crystal ball to predict the future. This is where retirement cash flow modelling can be incredibly useful. This can help you estimate your future income and expenses in retirement and give you a better idea of how much money you’ll need to have saved in order to maintain your current lifestyle.

By creating a model of your expected income and expenses, you can better plan for your retirement and make sure that you have enough money to cover your costs. This type of modelling can also help you to identify any potential shortfall in your retirement savings, so that you can make adjustments to your plans accordingly.

If you are nearing retirement or are already retired, cash flow modelling can help you: understand how much income you will need in retirement; work out how long your retirement savings will last; determine the best way to use your retirement savings to generate an income in retirement; and find out how different life events (such as taking a career break or downsizing your home) could impact your retirement cash flow.

Would an annuity be beneficial?

Annuities can be a good way to combat rising inflation. Increasing annuities guarantee a stream of income that can offer protection against the cost of living. However, it is important to choose an annuity that has a high enough rate of return to outpace inflation, as otherwise you may end up losing purchasing power over time.

Some annuities offer built-in protection against inflation. For example, some annuities offer cost-of- living adjustments that increase payments to keep pace with inflation. This can help retirees maintain their purchasing power and keep up with the rising costs of living. While annuities are not the only solution for combating rising inflation, they can be a helpful tool for retirees.

Ultimately, whether or not an annuity is a good way to combat inflation depends on your individual circumstances. If you are concerned about preserving your purchasing power in retirement, an annuity can be a helpful tool. However, you should obtain professional financial advice to weigh the costs and risks associated with an annuity before making a decision.

Are you sitting on too much cash?

If you’re sitting on too much cash right now, with inflation on the rise, that cash could be losing value, so you may want to rethink your strategy. Inflation is a natural occurrence that happens when the prices of goods and services start to increase. This can erode the purchasing power of your money, which means that you’ll need more money to buy the same items.

There are a few ways to combat inflation and ensure that your money keeps its value. One option is to invest in assets that may appreciate in value, such as stocks and shares or property. No matter what strategy you choose, it’s important to be aware of the impact that inflation can have on your finances. By being proactive, you can ensure that your money keeps its value over time.

What is your attitude to risk?

When pension planning, your attitude to risk will play a big role in how your portfolio is structured. If you’re willing to take on more risk, you may be rewarded with higher returns. But if you’re not comfortable with risk, you may want to focus on preserving your capital.

Once you have a better idea of your risk tolerance, you can start to allocate your assets accordingly. For example, if you’re okay with some volatility, you may want to put some of your money into stocks and shares. But if you’re not comfortable with any volatility, you may want to keep your money in cash and bonds.

No matter how much risk you’re willing to take on, it’s important to remember that all investments come with some risk. There’s no such thing as a completely risk-free investment. But by understanding your risk tolerance, you can make sure that your portfolio is structured in a way that meets your needs.

Are you ready for retirement?

Retirement is inevitable, but knowing exactly when to do so is often unclear. No matter when you actually begin your retirement, you’ll benefit from planning your post-work life as early as possible. If you would like to review your retirement plans and find out more about our retirement planning services, then please get in touch.

Are you saving enough for retirement?

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  • 4 in 5 are not saving enough for an acceptable standard of living in retirement
  • Less than 5% of low-paid workers are saving at a rate which would provide an adequate standard of living
  • 55% of workers in the finance industry save at or above the ‘whole career’ LP benchmark compared to 2% of workers in hospitality. The ‘whole career’ Living Pension (LP) benchmark proposes either 11.2% of pay, or £2,100 per year for someone working full-time at the living wage.
  • 23% of male workers met the LP cash benchmark compared to 15% of females

For more information on our retirement planning services, please get in touch.

Source data: [1] https://www.livingwage.org.uk/sites/default/files/Living%20Pensions%20Report.pdf

Prepare for your retirement

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Independent Financial Adviser, Carl Hasty, outlines how you can prepare for your retirement including locating lost pensions, considering other income sources and calculating how much you anticipate spending in retirement by using our handy retirement calculator.

To discuss more about your retirement options or to find out more about our retirement planning services, please get in touch.

Retirement Savings Gap

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Four in five workers (16 million people) are not saving at levels which are likely to deliver an acceptable standard of living in retirement, according to research[1] – these numbers exclude Defined Benefit pension savings.

The key reason behind this low confidence is the inability to afford savings on an ongoing basis, followed by worry about paying off existing debts.

Future crisis

Low-paid workers are least likely to be saving at these levels, with fewer than 5% saving at a rate which would provide an adequate standard of living in retirement. Low savings levels are a long-standing issue; however, the cost-of-living crisis is exacerbating the problem.

The UK’s lowest-paid workers have been hardest impacted during the crisis, often struggling to make ends meet. As a result, many are unable to prioritise saving for retirement, and today’s cost-of-living crisis risks storing up a future crisis where millions are unable to afford even the basics in retirement.

Saving behaviour

Just as low pay has impacted female workers most, the gender pensions gap remains an issue. The report found that 23% of male workers met the ‘whole career’ Living Pension cash benchmark, compared to 15% of female workers, and that this is driven principally by differing levels of pay rather than differing saving behaviour.

The Living Pension benchmarks are based on a previous feasibility study by the Resolution Foundation, which proposed a ‘whole career’ benchmark of 11.2% of pay, or £2,100 per year for someone working full-time at the living wage.

Huge variations

The report also highlighted that there are huge variations in whether workers are meeting the Living Pension benchmarks by sector. 55% of workers in the finance industry save at or above the ‘whole career’ cash LP benchmark, compared to only 2% of workers in hospitality.

These differences persist even if they account for variations between sectors in workers’ pay levels, occupation and whether they are full-time. This suggests that sector differences in pension saving are driven either by employers’ behaviour or their approach to the overall renumeration package.

What if I could have the retirement I really want?

Planning so that you can enjoy today, whilst making sure there is plenty saved for the future, can be a tricky balance to get right. If you would like advice and support with retirement planning, please get in touch.

Source data: [1] https://www.livingwage.org.uk/sites/default/files/Living%20Pensions%20Report.pdf

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless plan has a protected pension age).  The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

Retiring Early

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Retiring early can give you that change of lifestyle you’ve been craving, but requires some careful planning. Financial Adviser, Andy King, discusses how he helped a client by discovering that they could retire early.

If you are unsure whether you can retire early, use our handy retirement age calculator to see how much you may need to save.

Worried about generating a retirement income?

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Worried about generating a retirement income? More over-50s returning to work amid cost of living crisis.

Older workers have been leaving the jobs market in their droves over the past two years, partly due to many re-evaluating what they want from their lives and careers during the course of the COVID-19 pandemic, and also due to the devastating impact the pandemic had on the prospects for many older jobseekers, who felt they had no choice but to leave the workforce.

But the cost-of-living crisis is now affecting some pensioners drastically, with more older people starting to return to work amid the ongoing crisis, new research has highlighted[1]. The findings identified economic activity levels among the over-50s are now at their highest since the pandemic began.

Impacting pensions

Analysis of official statistics appears to show the first signs of a return to the long-term trend of more economically active people over the age of 50 – a decades-long trend which, it said, was reversed by the pandemic.

Spiralling inflation and turbulent financial markets impacting pension funds are causing some people to unretire and find work again. There has been an increase in economic activity (those in work or looking for work) of 116,000 among the over-50s in the past year. More than half of the increase is being driven by men over the age of 65.

Retiring comfortably

In some ways, the pandemic forced the hands of many and gave them an opportunity to trial retirement. An early retirement can often seem like a dream when you’re stuck in the thick of the daily grind but, for many, giving up work abruptly can also result in a loss of structure, social connections and purpose, which can leave people feeling lost at times.

The current economic climate means that some people who thought they could retire comfortably during the pandemic are now having to unretire and find work again to bring in some extra income and top up their pensions while they still can.

Want to discuss how to make your money work for you?

If you’re getting ready to retire, or maybe you’ve already retired, now may be a good time to think about professional financial advice. It can take some of the worries out of retirement planning and ensure your money will go further. So if you have any concerns about your retirement, we can help make your money work for you. To talk to us, please contact us – we look forward to hearing from you.

Source data: [1] Analysis by www.restless.co.uk – Economic activity levels amongst people over the age of 50 hit their peak of just over 11 million just before the pandemic in the three-month period from December 2019 – February 2020. Since then, we have seen a decades-long trend reverse, with economic activity levels of workers aged over 50 falling by as much as 223,000 during the pandemic.

Is your money working hard for you?

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Are you feeling uncertain on the way forward to your retirement?

We offer a range of retirement planning services, including a handy retirement calculator to see how much you need to save for retirement. Alternatively, find out more about how our cashflow modelling service can help you visualise your expenditure, income and preferred lifestyle in retirement.

Early Retirement

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Regional Manager and Financial Planner, Dax Bayley, shares how he enhanced someone’s life by using cashflow modelling to help them to retire earlier than they had planned.

Feeling uncertain on the way forward to your retirement?

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Funding the lifestyle you want – get your retirement plans in motion

One of the most common concerns among those approaching retirement is whether they will have enough money to last them. A new study[1] shows that only 25% of retirees feel very confident they’ve saved enough for retirement.

As food prices continue to soar and petrol costs reach an all-time high in the UK, the rising cost of living is without doubt having an impact on many people’s financial plans, both short and long term.

If you’re approaching retirement or have already started taking money from your pension or other retirement savings, you wouldn’t be alone in feeling a little anxious about the effect the cost-of-living crisis might have on your lifestyle in retirement.

While it’s impossible to predict the future with complete certainty, there are a few things you can do to feel more confident about spending your money in retirement.

Add up all your sources of income

Your main source of retirement income may well be your pension plan. But when it comes to planning your finances in retirement, it’s important to think beyond this. Consider other potential sources such as Individual Savings Accounts (ISAs) and other investments, as well as any rental income you receive from rental properties you let.

And don’t forget the State Pension, which is currently £185.15 a week (£9,628 a year) for a single person with a full entitlement. Although the State Pension’s annual increase is currently below inflation, every little helps and the total of all your savings and income might add up to more than you think.

Watch out for unnecessary tax bills

Paying too much tax in retirement is a common pitfall for some retirees, and one that could be potentially avoided with having the right plans in place.

If you’re already taking or plan to take income from multiple sources, you need to consider how that will be taxed. When and how you take your money can make a big difference to how much tax you pay and how long it will last. Taking money little and often could make all the difference when it comes to reducing your tax bill.

When it comes to your pension savings, you can typically take 25% tax-free from age 55 (age 57 in 2028), either in one go or spread out over a longer period. After this, any money you take from your pension savings, as well as your State Pension, is taxable just like any other income.

That means you’ll need to pay income tax on anything over your tax-free cash limit and any annual personal Income Tax allowance you get.

It’s likely that the more money you take, the more tax you’ll have to pay, although how much will depend on which tax band your income falls into. So if you take all of your pension savings at once, or in big lump sums, you could be paying more tax than you need to. But by taking your pension savings over a number of years and taking just enough to stay in the lowest tax band you can, you could keep more of your money overall.

Make the most of your Individual Savings Account (ISA)

Another way to avoid an unnecessary tax bill is to make the most of your ISA savings. You don’t pay tax on any investment growth or interest you earn, or on the proceeds you take from an ISA. So it’s a very tax-efficient way to save.

You could consider using any ISA savings you have first and delay accessing your pension savings, giving them more time to stay invested and potentially grow in value. Remember though, the value of all investments can go down as well as up, and you may get back less than you paid in.

Or, if you’ve already started taking an income from your pension, you could use your ISA savings to supplement that income. This could allow you to take smaller payments from your pension and avoid overpaying Income Tax on them.

Getting to grips with tax implications can be a bit overwhelming as there’s a lot to consider. Tax rules and legislation can change, and personal circumstances and where you live in the UK also have an impact on your tax treatment. On top of that, tax varies for other sources of income like property, state benefits, or even your salary if you’re planning on working in some capacity for a little longer.

Keep track of your investments

Where your money is invested could have the biggest impact on how long it will last in retirement. It’s important to regularly review your investments to make sure they remain on track and remain aligned with your plans and attitude to investment risk.

For example, your pension savings may be invested in fairly high-risk funds that have the potential to grow significantly in value, but also are more likely to be impacted, particularly during periods of market volatility. Moving to lower-risk investments means that you’re less likely to see big ups and downs in the value of your pension savings.

However, if you’re relying on your pension savings to provide you with a comfortable income for the rest of your life, you also need to make sure that your investments will provide enough growth potential. This is particularly important in the current climate where your money faces the double challenge of rising inflation and potentially having to last for many years.

Want to review your retirement plans?

If you have specific questions about funding your retirement lifestyle, feeling anxious about spending money in retirement or asking yourself “how much do I need to retire?” then speak to us to discuss your retirement options.

Source data: [1] Class of 2022 UK retirement report consumer research of 2,000 UK adults for abrdn who were either planning to retire in the next 12 months, or who had retired in the 12 months prior. Research was conducted by Censuswide in late November / early December 2021.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless plan has a protected pension age).

The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Tax treatment varies according to individual circumstances and is subject to change.

Worries About Retirement

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Worries about retirement, research has found:

52% of 1,212 UK adults surveyed are concerned they have not saved enough money to sustain their current lifestyle in retirement

34% of full time works say the state of their retirement finances is a cause of “significant stress”

9% said they doubt they will be able to fully retire

37% say they have a clear retirement savings strategy

24% had reduced their contributions since the start of the Covid pandemic

On average, respondents said they saved £298 into their pension each month