Retiring? 5 key questions
Nearing retirement? Do you already have a firm or approximate date in mind, or is force of circumstance and the need to continue earning your living making retirement a more and more distant dream?
Wherever you place yourself along that spectrum – of definitive or potential retirement – we suggest there are 5 key questions you might address right now, to get to grips with what you want your retirement to look like.
Coming up with the answers may leave you in a much better position to make the most of your options by seizing the opportunities for a long and happy retirement.
1. Picture your retirement
How do you picture your retirement? What are you likely to be doing? But – more to the point – what do you want to be doing?
It’s going to be your opportunity to do more of the things you enjoy doing now – if only work didn’t get in the way quite so often. It’s also going to be a time when you get to do some of things you’ve always had a yearning to do, but never quite found the time, energy or savings to fit into your present workday routines.
The more specific you are, the more detail you can pack into the picture, the more likely your plans may come to fruition.
2. How long is retirement?
How long is a piece of string you might as well ask!
How long you are retired depends, of course, on how long you expect to live – and this clearly varies considerably from one person to the next. Lifestyle choices – such as smoking, drinking and the amount of exercise you take – may play their part, but much also comes down to the luck of the draw.
It is a question worth thinking about, though, since the length of your retirement is also going to determine how much money you are likely to need to fund it.
3. How much will you be spending?
So, that leads on to one of the most common questions of those approaching retirement – how much is it all going to cost.
In an article on the 3rd of January 2018, the Telegraph newspaper cited estimates that the average retired couple in the UK currently spends £18,000 a year on daily essentials such as housing, food, transport and utilities.
Those achieving some degree of comfort in their retirement, however, are more likely to be spending somewhere in the region of £23,000 to £27,000 a year.
The figures are echoed in research updated as recently as September 2018 and conducted by the Consumers’ Association’s Which? magazine, which estimated you’ll need an income of around £39,000 if you also want to factor in the cost of a new car every five years and longer holidays in more exotic parts of the world.
4. So, how big a pension pot does that mean?
This is where the answers are likely to get considerably more complicated.
Which? for example, calculated that if you are aiming for a comfortable – rather than more lavish – retirement on £26,000 a year, your pension pot may need to extend to the purchase of a £370,000 index-linked, joint-life annuity.
On the other hand, the same target might be achieved with an initial £210,000 in a defined contributions pension pot, which is used for income drawdown when you retire.
5. Is your pension pot big enough?
The answers so far suggest that so much depends on the lifestyle you expect, how long you live, what you are likely to spend, and how you manage your pensions and savings.
For an answer to that last question, why not seek our expert advice on pensions and savings management here at Independent Pension Specialists?
Any data quoted in this article is correct as at the time of writing.