Will I have enough to retire? Five essential questions to start planning for your retirement.
The good news is that you are probably already well on the way to having enough to retire on, you just donʼt realise it yet.
These are the five questions that you need to answer to start planning for your retirement.
1. How much income would I need if I retired today?
Ideally, the mortgage will have been paid off, dependents may have flown the nest, you wonʼt be commuting to work but you will perhaps travel more (at least in young retirement) and you will probably spend more time on your hobbies and interests.
Imagine you are at your chosen retirement age now and work out an expenditure list, weekly, monthly or annually. This will be your minimum target income, after tax.
2. What have you already got that will add to the pot for retirement?
Donʼt just think about your existing pension, include old pension benefits from previous employment, current savings, paid up policies, shares etc. as they all potentially add to the retirement fund. See the attached list for ideas of what you might have forgotten about.
3. What will I get from the State?
Many of us will now fall under the New State Pension rules which mean weʼll receive a flat rate pension based upon our National Insurance Record. Currently the maximum is £155.65 per week, so £8,093.80 per annum for a single person and potentially £16,187.60 for a couple.
We canʼt do this for you, but the quickest way to find out what you may be entitled to is to visit https://www.gov.uk/check-state-pension
If you havenʼt already got one, youʼll need a Government Gateway ID which is simple to apply for online as part of the process of obtaining your pension statement. Youʼll need some personal information too, to prove your ID, such as your National Insurance Number and certain details from your Passport or P60.
It takes a few days to get your authorisation code for the Government Gateway ID in the post, so you may not be able to get the information you require immediately, but once youʼve got it you will have an idea of whether or not you are on track for the maximum State Pension or what you need to do the get it.
The system also allows you access to your past National Insurance Record to see if there are any gaps that you may be able to fill.
4. Are you likely to benefit from an Inheritance?
It is an awful thing to consider, let alone count upon in retirement but the fact remains that many parents plan quite carefully how to enjoy their retirement but leave their children with something when the pass away.
As you approach retirement there may be the possibility that you will inherit from parents, so this can be incorporated into the calculation.
5. How much spare Income do you have?
Work out your current expenditure and deduct this from your current income and this will give you an idea of your surplus income. This will vary over time, but it is essentially what you have to play with to help meet your target income in retirement.
Armed with the above information we can construct a lifetime cash flow forecast which will take account of your unique circumstances and form the basis of a financial plan that will hopefully result in you achieving your retirement goal and beyond.