Retirement planning is an important step to ensure a financially secure future. When calculating how much you’ll need to live on in retirement, there are various factors to consider. Everyone’s circumstances are different.

While the general rule of thumb suggests aiming for around two-thirds of your final salary at retirement after taxes, it’s crucial to consider your requirements and desired lifestyle. Some individuals may need more or less depending on housing costs, healthcare expenses, travel plans and other lifestyle choices.

It’s essential to assess your situation and obtain professional financial advice to determine the appropriate amount to fund your desired retirement lifestyle.

HERE ARE FIVE KEY QUESTIONS TO ASK YOURSELF WHEN PLANNING FOR YOUR RETIREMENT
1. WHAT DOES MY IDEAL RETIREMENT LOOK LIKE?

Consider what you want to do in retirement and how you envision spending your time. Whether travelling, pursuing hobbies or spending time with loved ones, understanding your retirement goals will help you plan accordingly.

2. HOW MUCH WILL IT COST?

Evaluate your expected expenses in retirement by categorising them into essentials and non-essentials. Essentials include housing costs, utility bills, insurance and everyday living expenses. Non-essentials may include leisure activities, travel and entertainment.

3. WHAT SIZE PENSION DO I NEED?

Once you estimate your required retirement income, you must determine how much savings you’ll need to generate that income. This calculation considers life expectancy, investment growth, tax implications and inflation. Obtaining professional financial advice will assist you in determining the appropriate pension size for your retirement goals.

4. ARE MY EXISTING SAVINGS ENOUGH?

Assess your current savings and investments to determine whether they are sufficient to meet your retirement goals. If there is a shortfall, consider strategies to boost your pension savings, such as increasing contributions or extending your working years. Additionally, evaluate other potential sources of retirement income, such as Individual Savings Accounts (ISAs) or the State Pension.

5. AM I ENTITLED TO STATE BENEFITS?

If you have made 35 years of National Insurance (NI) contributions through work or by claiming certain benefits, you are entitled to claim a State Pension from age 66. The full new State Pension is now £203.85 a week (tax year 2023/24). And if you reached the State Pension age before April 2016 and are on the older basic State Pension, you will now receive £156.20 per week (tax year 2023/24). However, it’s important to note that this amount may not be sufficient to fund a comfortable retirement and may fall below the essential income level for many individuals.

WANT TO PLAN YOUR RETIREMENT INCOME STEP BY STEP?

Retirement planning can be complex. By taking proactive steps and making informed decisions, you can work towards a financially secure and fulfilling retirement. Please contact us to find out how we can help you put in place the right retirement plans for your future.

 

This article does not constitute tax or legal advice and should not be relied upon as such.

The tax treatment is dependent on individual circumstances and may be subject to change in future. For guidance, seek professional advice.A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the 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.

Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.

The Financial Conduct Authority (FCA) does not regulate tax advice, estate planning, trusts or will writing.

The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.

Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

Pareto Financial Planning Limited is authorised and regulated by the Financial Conduct Authority (FCA).