A complete guide to retirement planning

An older women enjoying a cup of tea outdoors on a bench with her dog
Financial planning for retirement might not be something that you want to think about, especially if you’re still relatively young, fit and healthy.

However, it’s a good idea to start thinking about saving for retirement as early as possible so that you’re better prepared in later life, financially.

In our guide on how to plan for retirement, we’ve put together our best planning for retirement tips so that you’ll feel better prepared for when the time comes for you to retire.

We’ve included everything you need to know about retirement income planning, early retirement planning, how much you need to live on in retirement and the best way to save for retirement in the UK. 

Why do I need to think about planning for retirement now?

Nowadays, there is more and more focus on planing for their retirement, as the better prepared you are, the more money you’ll be able to retire with and the more financial freedom you’ll be able to enjoy later in life.

You also now have to wait longer in order to receive your state pension, so it’s a good idea to start thinking about taking your retirement planning into your own hands and considering all your financial options so that you’re well prepared for retirement.

While it’s certainly not the most engaging subject to think about and many aspects of retirement planning can actually be quite overwhelming and even upsetting, it’s important to think about planning for your retirement as soon as possible so that you can fully enjoy your later years.

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How much should I save for retirement in the UK?

The amount of money that you need to save for retirement is dependent on numerous factors such as when you plan on retiring, how much your expenses usually are and how much you’re willing and able to save towards your retirement.

Of course, if you plan on retiring early, then you’ll have to save more money than if you plan to continue working into your later life.

According to research, it’s suggested that the average retirement income in the UK is £33,000 per year for a single person or a combined annual income of £47,500 for couples.

These averages can, of course, vary enormously and it all depends on the kind of lifestyle you want to enjoy when you’re retired. For example, if you plan on taking numerous holidays throughout the year, then you might need more than the figures above. Whereas if you’re pretty frugal with your money and spend very little on luxuries such as holidays and clothes, for example, you could probably survive on much less.

Planning for retirement at different ages

Planning for retirement in your 50s or 60s is likely to be much different to planning for retirement in your 20s or 30s.

In your 20s and 30s, your financial priorities will likely revolve around paying back any student loans and debts, saving for a house and perhaps starting a family. 

Whereas when you’re in your 50s, this is when you’ll need to start seriously thinking about your retirement plan, including your pension options and when you want to retire.

When it comes to planning for retirement in your 50s, you need to be aware of the fact that the state pension age seems to be ever-increasing (the state pension age is currently 65-years-old in the UK and is expected to rise to 67 by April 2028).

It’s also important to note that you’re able to access your own personal pensions from the age of 55, but you might find that you have to pay higher rates of tax and interest if you take your money out at this age. 

Retirement planning in the UK - A checklist

In order to be better prepared for retirement, you should create your own retirement planning checklist of all the steps you need to take to get to where you want to be.

Alternatively, you can take a look at our retirement planner checklist below for top tips and advice in order to ensure that you can enjoy a smooth transition into your later life once you’ve stopped working.

  • Check your pension statements to see how much your retirement income is likely to be. While you might be aware that your pension pot racks up during the course of your working years, you might not actually know how much money you have in your pension pot altogether. You could even contact an expert to receive a pension review.
  • You will also need to check your state pension as well as the age at which you can expect to receive this. As the state pension age continues to rise, you should get a good idea of when you can expect to receive your state pension so that you have more money to rely on in later life.
  • Next, you should start to work out your current monthly expenditures in order to get a feel for how much money you currently spend so that you know how to plan financially for the longer term. Of course, once you retire you’ll likely have less money to live on than you did while working, but you might also have fewer expenses if you’ve paid your mortgage off before you retire, for example.
  • It’s important to remember that you don’t actually have to stop working in order to take out your pension, but the earlier that you do draw from your pension, the less money you’ll have in your pot in later life. You also won’t be able to take your pension out before you’re 55, but you should start to think about what age you’d like to take it out after you turn 55.

When it comes to retirement, it’s a good idea to try and be as prepared as possible so that you can live a relatively financially carefree life once you’ve retired.

Ensure that you’re aware of how much money you’ll realistically need to save in order to live the retired lifestyle that you want to have and consider the age that you want to draw from your pension.

For further tips relating to end of life planning, take a look at our useful articles listed below.

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