Planning for a 100 year life is becoming the norm. By 2043, a fifth of men and 26% of women born in the UK are expected to live to at least 100, according to the Office for National Statistics. Today women aged 65 can expect to live another 22 years, and 20 years for men. https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/pastandprojecteddatafromtheperiodandcohortlifetables/1981to2068
Based on these life expectancy trends, it is realistic if retiring at 55 to live to, say, 85, which means paying for a 30 year retirement. This will require a large pot or very modest expectations. For most people, a secure retirement necessitates making some plans.
To achieve a comfortable retirement of £33,000 a year for 30 years you would need to accumulate a pension pot of around £500,000, according to the Pension and Lifetime Savings Association. https://www.retirementlivingstandards.org.uk/ The earlier you make this a life goal, the easier it is to achieve.
Why do we love lists? Because they show us clearly and quickly our plan for a day. Ticking things off gives a sense of achievement. Planning for our longer-term future is harder, (it’s tough trying to guess what will happen 30 years from now), but is even more rewarding.
Money in a pension may grow bigger the earlier you put it in, because of the power of compound interest. Got a pay rise? Consider adding it to your monthly pension contributions – you won’t miss what you didn’t have, and you can sleep soundly knowing you are laying solid foundations for your future.
Starting young gives you a good 40 years of potential pension growth. You can take more risk with your money which can pay off over time, because you have the long-term to make back any short-term losses, and a small difference in annual returns can have a significant impact over time.
High fees, commissions and charges are negative factors for pension growth, so always keep an eye on what you’re paying. An extra one percent here and there may not sound like much but can deplete thousands from your pot by the time you retire. High charges are even more damaging in times of poor market performance, as lower returns are made worse when high fees are subtracted, so your pot takes longer to recover.
You could save on fees by bringing together several smaller pensions into one. Analysis by wealth manager Quilter found a person saving for a comfortable retirement could save over £140,000 by consolidating multiple pension pots into just one, which could be enough for over four years of income in retirement.
Your 50s are the time to really maximise your pension savings. Most people are hitting peak earnings around this age and are looking to retire within the next 10 years. Adding as much as possible to a pension at this stage is a good idea, to turbo charge your pot’s growth and, if you are paying in via a workplace scheme, make the most of the final few years of your employer’s contributions.
Making a comfortable retirement an ongoing life goal, rather than a ‘nice to have if I get round to it’, gives your intentions purpose, and makes it much more likely you will achieve the secure later years you really want.
Contact Brite Advisors USA, Inc. for retirement advice.
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