Ok, ok… I know that planning your retirement might not exactly be top of your to-do list today! But for loads of us, it’s definitely one of those things that niggles away at the back of your brain. We all know the importance of financial planning for retirement, even if you haven’t got around to it yet.
So how do you plan for your retirement? What advice do you need to take? Today’s quick blog will help!
Let’s start with the state pension, one of these things that people often chat about online (especially after all the recent headlines).
When we were growing up, we were told not to rely on the state pension because it probably wouldn’t be there by the time we get old. Or if it was still there, it wouldn’t be worth anything anyway.
But in practice the state pension is put up every single year because of what they call the ‘triple lock’. It goes up by either average earnings, inflation or 2.5%, whichever is the highest.
Last year, the increase was much bigger than it’s been in previous years, because inflation was so much higher.
So why is the state pension going up a bad thing?
Because it lulls people into a full sense of security.
Before 2023, if you had a full state pension with 35 years of National Insurance contributions, it worked out that you’d receive around £614 a month.
If you asked most people whether they could live on £614 a month, they’d say no. It’s not enough. They’d need to find a way to supplement their income and so would be more likely to save into pension or ISA or some sort of other investment, or expect to work part-time to have enough money coming in to live on.
Now though, the full state pension has gone up to £11,500 a year.
Ask most people if they could live on that? It certainly sounds like a lot more. It’s not really that much more – £958 a month, compared to £614 – but mentally, £1000-ish a month feels a lot more like you could live on it.
Especially if you’re looking at it as a couple. Lots of people will now be thinking “well, we’d have £2,000 a month coming in. So that’ll be all right then. The mortgage will be paid off and the kids will have left home. We could manage on that”.
Which then prevents them from taking the action they need, to make sure they have a comfortable retirement.
Why is £1,000 a month for one person or £2,000 for a couple not going to be enough in retirement?
Because the cost of things go up. Just look how much more petrol and food and energy are now, compared to 10 or even 5 years ago.
Even though it’s index linked, it still doesn’t give you a lot of money to spend on stuff.
The state pension is LESS than minimum wage… designed to be that basic safety net level payment, that gets people out of trouble. It’s NOT going to give you the quality of life that you really want and deserve to have. You’ve not worked this hard to build your business to have to scrimp and save in retirement and go without days out, holidays and those things that make life fun, because you can’t afford them!
So what should you do if you want to be planning for a decent retirement?
The first thing is to work out how much money you’re realistically going to need for the lifestyle you really want.
The second thing is to see how much you’ve got in place already and what income you may still have in retirement.
The third thing is to create a plan to close the gap – and then take ACTION to make it happen.
Of course, I do get that each of these three things may well sound pretty daunting, if you’re trying to figure out alone! And that in itself puts people off. It feels too big to get to grips with, so it gets put on the back burner (again) as something to think about another day.
This is why I created PATHWAY – specifically for 40-something business owners with little or no pension, who want to finally sort it out and get a solid retirement plan in place. In the easiest way possible!
It’s my flagship programme, a hybrid of 1:1 and group work, bringing together the work I do as a Financial Adviser with the wealth strategy stuff and ongoing support you need to actually get your retirement planning DONE.
I’ll show you how to find additional money now to put towards your retirement goals, so you start to feel excited about what’s possible for you… even if you’re starting from zero, we’ll start building a pot of assets for a secure future.
Here’s the link again with all the details!
Until next time,
Claire