• Aventur Wealth

How Much Is Enough? Your Guide to Retirement Planning

Updated: Sep 30, 2020

As 2019 draws to a close, it’s a great time of year to reflect on whether you are on track to meet your retirement goals. Are you saving enough money for the future? Have you ever considered an investment strategy? Most importantly, do you know how much is enough for you to be able to enjoy your retirement?

“Retirement's the most wonderful thing. I get to enjoy all the things I never stopped to notice on the way up. After an extraordinary life, it's time to enjoy my retirement.” Patrick Macnee, Actor

Before we answer the question ‘how much is enough?’ with some research-based figures, why not take a minute to consider how you plan to spend your retirement?

The five questions below will help you assess how much money you are likely to need once you are ready to retire.

1. What would you like to do? This is our number one question because it will dictate how much money you will need to save. Spend some time reflecting on your life goals or any ‘bucket list’ dreams.

The activities you choose and places you wish to visit will incur some level of financial commitment. For example, some people take a hobby to the next level, which may require specialised equipment or even a customised building.

2. When would you like to retire? Since the ‘pension freedoms’ gave over-55’s the ability to draw freely from their private pension income instead of having to buy an annuity, many people have been able to retire sooner than planned.

However, without some careful financial planning, there is a real risk that your pension savings could run out during the course of your lifetime, especially as we are now living longer than ever before.

3. Where will you live after you retire? Many people choose to downsize, as children have long left home and they find themselves with surplus space. However, some people choose to stay in their property, especially if the mortgage has been paid off, and buy a holiday home instead. Whether you’re buying a second property in the UK or abroad, this will have an ongoing impact on your savings and pension income.

4. Will you have different income sources? Many people retire with multiple incomes; this could include a pension, business, rented property or a holiday let. Every individual income stream needs to be accounted for in your retirement plan. For some people, certain additional income streams may be a goal for when they do come to retire. Before starting any new venture, we would strongly recommend seeking professional financial advice to ensure your hard-earned wealth is well-protected.

5. What are your current outgoings? Ideally, you will have a monthly budget and already know how much you spend. However, if this is something you have not done in a while, then calculate your monthly outgoings - include household bills and regularly bought items, food, clothing, fuel, eating out, clubs, sports, and so on - this will give you a good idea of your current spending and will help you calculate your future spend after you retire.

Once you have answered the above, you will be in a better position to evaluate how much you will need for your retirement.

The current average cost of retirement

According to Which?, most people greatly “overestimate how much they’ll need to live on in retirement, thinking that they'll spend the equivalent of their wages.”*

In 2019, Which? conducted a survey of their members, which showed that an average retiree spent around £2,220 per month (£27,000 per year) per household. This sum includes basic expenditure and a few luxuries, such as eating out, enjoying hobbies and taking European holidays. Bear in mind that this figure relates to the present and does not include any future rises in inflation or interest rate changes.

Therefore, depending on when you are looking to retire, the sum required for you to enjoy a comfortable retirement could easily rise significantly.

The cost of a luxurious retirement

Based on the Which? research, if you are planning to enjoy long-haul holidays, such as luxury cruises, and a new car every few years, then you will need around £42,000 per year.

However, this figure does not take into consideration your current or preferred lifestyle. An individual’s perception of ‘luxury’ will differ to another, so your present expenditure needs considering before you assume that you will be happy to retire on a certain sum. Again, this figure is likely to change in the coming years due to inflation. Therefore, if you are looking for a luxurious retirement, then it’s worth considering a diverse savings and investment strategy.

Unfortunately, it is a sad fact of life that most people fail to achieve their retirement targets. As an ageing population, long gone are the days when you could simply rely on your state pension to see you through your golden years.

Unfortunately, it is a sad fact of life that most people fail to achieve their retirement targets. As an ageing population, long gone are the days when you could simply rely on your state pension to see you through your golden years.

The UK government** encourages everybody to plan for their retirement to ensure people do not run out of money. Life can bring some unpleasant and unexpected surprises, so if the worst were to happen, it’s essential that you and your family are protected and financially secure.

It’s never too late to start saving for your retirement. However, the earlier you start, the better. Whether you are looking for a comfortable or luxurious retirement, then it’s important to seek advice from an independent Financial Adviser, who will be able to help you successfully plan for your future.

Do you know how much is enough for you to enjoy your retirement? Get in touch with our team today, who would be happy to discuss all your saving options with you.

#retirementplanning #pension #financialadvice #financialgoals #retirementgoals


* Which? https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

** Gov.uk: https://www.gov.uk/plan-for-retirement

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