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Hacks to ensure you have a happy retirement – finances

5 minute read

How much do you really need to retire? Like, REALLY retire and have the lifestyle that you want?

Have you taken the time to look ahead and really think about what you need in the coffers to do all the things you want to do? Understanding and planning your funds in advance will really help to ensure you can enjoy your later life.

What kind of retirement do you want?

Everyone will have different dreams. You might imagine travelling the globe, moving abroad, or having the car you always dreamed of when you finally retire. However, if you don’t plan your pension and finances in advance, you might find those things harder to achieve than you initially thought.

Planning your pension can seem like an overwhelming process to combat. It’s not always clear what you need to consider or how much you might need. And there are a number of options for income – it’s good to explore those too.

Consider your lifestyle

The first steps are to consider what your lifestyle is like and what you see it being when you get to retirement. The goal of any pension is to be able to maintain the standard of living you’ve built during your working life. After all, it’s what you deserve!

Think about what you see yourself doing in retirement.

• Going on regular holidays. Europe or further afield?
• Owning a nice car. Upgrading it every few years?
• Buying new clothes and shoes for yourself
• Treating your family to nice gifts or holidays

Obviously these are just a few thoughts – the world is your oyster. But all these things will need to be factored in when you create your pension budget. Start to think about what kind of costs you might expect.

Building your budget – how much do you need?

No one wants to spend their retirement worrying about bills and sacrificing little comforts. Now you’ve considered your lifestyle, building a personal budget will really benefit you in retirement.

The realist bare minimum for a single person pension is estimated by The Retirement Living Standards is around £12,800 a year. This is the minimum in the sense it’ll pay all your bills and food, and leave a little for a holiday in the UK, and around £580 for clothes and shoe shopping.

For a retirement that’ll give you a little more comfort and security you’d be estimating £23,300, nearly double that amount. You could replace your car every few years, holiday into Europe and have more left over for buying little luxuries.

It’s estimated you’d need £37,300 a year for more financial freedom and luxuries like longer holidays and more on your food shop. Bear in mind these are all estimates for a single person, and it’s definitely better value for a couple, than a person on their own.

Look at how much do you need for retirement to see estimates for a couple, and more for London living.

Improving your funds

If, after looking at these figures and what you want for retirement, you’re seeing a bit of a mismatch, don’t lose heart. If your pension is looking a bit low, you do have options.

You can increase the amount you pay into your pension pot each month, for example. And you’ll get tax relief on what you pay into your pension.

Investments and savings accounts are good ways to boost your income. Basic rate taxpayers can earn up to £1,000 each year tax-free, while Individual Savings Accounts (ISAs) allow you to take a tax-free income without any limit on how much you take out.

If finance jargon can feel a bit overwhelming, welcome to the club! One of the main focuses here at Pension Buddy is to de-mystify this sort of thing, and help you make excellent plans.

You can find lots more ideas for making a bit extra for your retirement here, including the best way to approach equity release safely, and tips on investment strategies.

Expect the unexpected, and don’t stop saving when times are hard!

Don’t forget to include unexpected expenses like a broken boiler, or a failed MOT when you’re planning for retirement! Things can and will go wrong, so make sure you’ve got some kind of contingency pot for those unexpected emergencies.

Inflation is also something very much on the forefront of everyone’s minds right now. When planning ahead, it’s advisable to build in the rate of inflation – and then a bit more. Things are going to cost more in the future and it’s better to over-egg that than the opposite.

And – really importantly – if you’re saving for retirement and things are hard, try to tighten your belt now rather that cut back on your contributions if at all possible. You’ll thank yourself down the line!

The future

Money figures and budgets might feel quite daunting. You can complete our retirement health checker if you’re not sure how your pension pot is coming along for your desired lifestyle. It’ll also help guide you into what action you might need to take to be prepared for the future.

Happy planning – and happy retirement!

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