The latest research by pension providers Scottish Widows is that 35% of adults risk not having sufficient funds to pay for essentials such as rent and utility bills in their retirement.
That may seem a worrying statistic, but like so many things to do with retirement, it pays to delve down into the nitty gritty. The figure is actually 35% of adults currently aged between 22 and 65 are at risk. That means a large percentage of them have time to do something about that scenario – and in the case of the 22-year-olds, decades of time.
“Automatic enrolment has transformed pension saving with more than 10.8 million workers signed up to a workplace pension and an extra £33bn saved in 2021 compared to 2012.”
What about the other %s?
Other figures are also revealing:
- 36% of adults have sufficient for a comfortable lifestyle
- 11% have sufficient for a moderate lifestyle
- 18% have sufficient for a minimum lifestyle
How much is enough?
This all leads to the inevitable question, “How much do I need to retire?”
This is actually not the question. The question is:
“How much do I need to lead the lifestyle I want in retirement?”
Once you know what you want to do, you can figure out how much you need to fund it – your “number”.
As an example, former Chelsea midfielder Cesc Fabregas has just announced his retirement from football at the age of 36. He’s probably earned a few bob over the years, but he also needs to know his number to fund his lifestyle for another potential 60+ years.
Needless to say, he’s not going to actually retire full stop!
“I’m now going to cross the white line and start coaching the B and Primavera teams of Como 1907 … This charming football team won my heart from the first minute and came to me at the perfect time in my career. I will grab it with both hands.”
Forced back to work
Full retirement is still a long way off, but if Cesc wants his number to include elements of his current lifestyle, now is the time to start laying down provisions to make that number happen.
What he and other retirees of all ages don’t want to find is that by miscalculating their number, and/or not allowing for economic fluctuations, they are forced back into work.
According to an article in The Guardian:
“There were almost 100,000 more Britons aged 65 and over in the workforce this spring compared with three months earlier, more than twice the rise in those in their 50s and early 60s.”
Too much to retire?
Let’s just rewind to those Scottish Widows figures at the top again: “36% of adults have sufficient for a “comfortable” lifestyle”. That means that 1% more people have the top level of provision as those who haven’t, what the report calls “significant polarisation.”
So what is a comfortable lifestyle? The Scottish Widows report defines this as “More financial freedom and some luxuries”.
- If your plans for retirement include exotic holidays, buying a collection of Ferraris and perhaps a super yacht, then you’ll need a number that is appropriately high.
- However, if you want to have the freedom to do what you want, when you want, with a budget for holidays and the finer things in life, then you might actually have already reached your number, possibly years before your planned retirement age.
So you could actually potentially retire now, and not spend that last few years at work scrabbling to earn as much as possible when you actually really don’t need it. Now there’s a thought!
What every potential (and current) retiree needs
What you DO need is a plan of what you want to do in retirement. As I’ve said many times, that’s a proper plan, not a list.
- A list is a series of jobs, chores or experiences that has a finite end.
- A plan is how you wish to lead your life in retirement; what you do every day, how you contribute and/or give back, how you keep your mind and body active, and how you build memories to savour and enjoy life.
That’s one of the key reasons I became a retirement coach. I saw so many clients as a financial advisor trying desperately to build enormous pension pots with no idea of who they were going to spend their time, let alone their money.
Yes, it takes time and effort but planning a retirement with purpose will pay dividends in the long term. Burying your head in the “Yikes I’m approaching retirement” sand will not.
If you’d like to discuss your retirement plans, or want help in making a plan from scratch, contact me for an appointment. I’m here to help.