Will your finances be sufficient to fund your retirement? Here are some simple tips to help you plan for life after you stop working.
You may dream of sailing the high seas in a yacht; buying a small cottage in the countryside, or perhaps you don't intend to change anything about your lifestyle when you reach retirement age. Regardless of your goals, you should already be developing a retirement plan.
Aegon's purpose is to help people achieve a lifetime of financial security. Not surprisingly, therefore, writing and frequently updating a retirement plan has been a constant theme in our annual Aegon Retirement Readiness reports for several years.
Planning for such an important phase of seems like an obvious step but the available evidence would suggest otherwise. The seventh annual Aegon Retirement Readiness Survey — published in June 2018 — indicates that only 13 percent of workers have a written retirement plan. Another 44 percent say they have a plan, but that it is not written down. Only 32 percent of workers have a backup plan if they are unable to continue working before their planned retirement age.
Globally, workers expect they will need 68 percent of their current annual income in retirement. Alarmingly, only a quarter (25 percent) think they will achieve this retirement income and a further 13 percent feel they will achieve around 75 percent of their required income.
Various groups within society face unique challenges when it comes to saving for retirement. Aegon's annual research has over the years focused on the specific needs of:
Benefits of a written plan
Whether you fit into one group or another, how will you know what your target income should be and whether you are on course to achieve your goal unless you have a clear written plan?
Writing a plan on your own — regardless of your level of financial literacy — should not be seen as a substitute to obtaining professional advice on the regulations and best strategies for retirement saving in your country. Any number of retirement specialists and online retirement calculators available thru a simnple internet search. Aegon, for instance, is active in about 20 countries worldwide. Click here to find your local Aegon office
A draft of a written plan is however a good starting point for a discussion with a qualified retirement expert. Writing your plan helps to concentrate your mind and allows you to chart your progress over time towards your goal. It makes it easier to set targets and to spot potential gaps in your finances. Rather than purely am unavoidable chore, planning in advance for retirement can be quite rewarding and even fun!
Planning tips
1. Writing a plan — regardless of your level of financial literacy — should not be seen as a substitute to obtaining professional advice specific to your country and/or individual circumstances. Aegon, for instance, is active in about 20 countries worldwide. Click here to find your local Aegon office
2. Write a short description of the type of retirement you envisage for yourself (and partner). Ask yourself whether you expect to maintain your current standard of living, or do you expect to be spending more or less during retirement?
3. How long do you imagine the retirement phase of your life could last? Remember due to improving health, many people may live 20 years or more after reaching the statutory retirement age.
4. Make a spread sheet chart in which you will chart your anticipated income and costs for each potential year of retirement
5. Make an inventory of the income which will be available to you (and partner) during retirement. This could include: -
- state pension schemes
- supplementary pension schemes
- savings
- annuities
- investments / shares
- Major assets (home/car)
6. List of your current debts/liabilities such as mortgage and tax liabilities, and seek to start paying them off.
7. Start making a budget for your retirement years. Offset your potential income against your projected annual expenditures during retirement. You could consult a free retirement readiness apps available on many pension providers' websites. Examples include Aegon UK's Retiready.
8. Your planning may reveal a gap between your projected income and potential costs. Don't panic. Seek professional advice to help bridge any gap and/or moderate your ambitions after retiring.
9. Aegon's retirement research shows that a good retirement isn't all about wealth. Consider the importance of health and try to live healthily and stay active.
10. Have a Plan B. No matter how healthily you live, the potential for an unexpected injury or illness can never be discounted. What if you have to stop work earlier than expected due to ill health? What if you develop a medical condition after retirement that imposes a strain on your finances. Make sure you have a a fallback position such as a more modest plan and/or chronic illness insurance