The earlier you start to address retirement planning the better, especially as the increase in the state pension is accelerating.
When would you like to retire and what regular expenses will you have in retirement? A good starting point is to consider the regular expenses you have today and identify which will continue into retirement. In addition, consider the cost of hobbies and holidays to provide a more accurate picture of how much you will actually require in retirement.
• KNOW HOW MUCH YOU HAVE
What arrangements do you already have in place? Existing pension policies, benefits from previous employment, savings, investments, rental property and other assets can all play a part in securing income in retirement. Dig out the details of what you already have and quantify how much these can provide for you later in life. This is what you have now.
• KNOW HOW MUCH YOU NEED
Using sensible assumptions, a qualified financial planner will be able to calculate the capital sum required to provide you with your target level of gross income when you want to stop working.
They will also be able to calculate the level of monthly funding you need to commit to in order to achieve your capital sum.
A good planner will create a diversified, tax-efficient portfolio which will be customised to suit your circumstances which will maximise the probability of your plan succeeding over time.
• TAKE ADVANTAGE OF PENSIONS AND TAX BREAKS
What retirement benefits does your current employer provide? If you have not already done so, consider joining your employer’s pension scheme. Your employer may well match your own contribution or at least contribute something to the plan, which will significantly boost your overall provision. There is never a bad time to use your tax allowances whichever stage in life you are at. Individual savings accounts (Isas) and pension plans provide valuable tax incentives that accelerate the growth of your savings.
• STAY ON TRACK
Remaining on course to retire when you want is an ongoing process, requiring a review at least once a year. This will help keep you informed as to whether you are on track to meet your objectives or if not, what you can do to rectify that.
• Evan Duffus is a financial planner at Acumen Financial Planning