Your number is, quite simply, the capital needed to fund your retirement.
Free of mortgage commitments, what size pension fund would maintain your lifestyle without being drawn back to work? Research from Royal London suggests the average person will need a £260,000 pot to enjoy a basic retirement, but what about your future aspirations? For most people is that going to be enough? To help arrive at your number, we’d suggest there are five things you need to consider:
When do you want to retire? You may be planning an exit strategy from the business or agreeing a golden handshake, but at what age are you hoping to hang up your tie? Traditionally it coincided with your State Pension, but thanks to Pension Freedoms it’s no longer as relevant. Defining your own target enables you to set realistic benchmarks, measuring progress along the way.
It’s important to understand what you want out of life. Recent research by consumer group Which? found retired couples covering household essentials, also wanting to enjoy long-haul holidays and a new car every five years, will need around £39,000 a year. Whilst your State Pension will cover a proportion, it’s not going to be close to £39,000. Think about your income and expenditure commitments now, how does this reflect with your expectations?
Retirement options are much more complex since Pensions Freedoms; in many cases a guaranteed income from an annuity is a relic of the past. A predictable, reliable income drawn from your pension fund will require careful management, considering market fluctuations, the desire to leave a legacy and the unknown costs of long-term care, to name just a few considerations.
Research published by Retirement Advantage shows that almost 80% of people over the age of 50 significantly underestimate how long they are likely to live. This puts them at a serious risk of running out of retirement income. Men and women aged between 50 and 64 expected to live to 82 years old, but, statistics suggests their life expectancy to be 88 and 90 years old respectively! Be realistic, data doesn’t lie.
4. Unconsidered costs
Naturally difficult to predict, here are four areas to note (acts of God not included!):
These are just the known ‘unknowns’; there may be others that occur down the line, causing a drain on capital and effecting your income.
5. Financial Planning
Identifying and measuring these factors is a challenge. To make real sense of your number you need professional, considered, financial planning. A bespoke financial plan, incorporating lifetime cashflow planning, will identify your objectives and map how to best achieve them with a coherent, reviewable strategy.
Effective cashflow planning predicts the growth and income available from your pensions and assets in the short, medium and long term. It gives the ability to plan your retirement in various scenarios; at different ages, with the impact of large purchases, costs, gifting to your family, downsizing your home, etc.
Cashflow planning is not a one-time-process and will need regular reviews to reflect your evolving circumstances, but it will give you peace of mind, knowing you are saving towards a financial future that you have carefully considered and planned.
Ultimately, professional financial planning empowers you, making real sense of your financial situation. At Boolers we are a leading firm of pension specialists and wealth managers, get in touch to put your number in perspective.
“At Boolers, you know that things will be dealt with properly and professionally. A real safe pair of hands!”
“I have always found the quality of advice, technical knowledge and level of service is second to none. ”
“Thank you to all of you for such a wonderfully smooth transaction! Hope we can do it again some time.”
“Boolers provided excellent advice when we needed it most.”
“Boolers have provided myself, family and business with pension and investment advice for over 30 years and continue to provide a high quality professional service to us all on an ongoing basis.”
“Chris Ball has been our Financial Adviser for many years and, from the start, we have been impressed with his strategic sense, his deep knowledge and his skills in helping us build our own successful retirement. He understands our aims and how to achieve them and has taken great care of us throughout. ”