Can you fund your lifestyle post retirement?”
11 October 2016
When you dream about retiring – what does that dream look like? Are you enjoying several holidays a year, dining out with friends and family once a week, upgrading your car for something that you’ve always promised yourself?
“Retirement funding is black and white!” acknowledges Absolute Wealth Management’s Simon Harnaman. “You can either work longer because you cannot afford to stop, or have a retirement plan in place, continually investing a monthly amount whilst you are working, to ensure that you accrue sufficient wealth.”
What age do you want to retire?
At Absolute Wealth both Simon and fellow director, Pete McBride spend a great deal of their time advising clients how they can prepare for retirement. Their first consideration is to ask clients what age they think they would like to retire and the sort of lifestyle they want to fund. Based upon this Simon and Pete will consider how they can achieve this by producing a personal retirement plan.
“By getting clients to think realistically about how much they envisage needing on a monthly basis, we start working backwards to develop a bespoke retirement plan for them,” comments Pete. “As our diagram outlines, in order to have an annual retirement income of £30,000, a client would need to have a personal investment pot valued at £750,000.”
The most common way of building up a long-term retirement fund is to invest in a pension. Just like any investment, a pension plan needs to be built up over time, which is why both Simon and Pete stress the importance of advance planning. At Absolute Wealth clients can choose to invest in a variety of pension funds to help their money grow. They can choose a low risk option to guarantee a steady return. Alternatively, they may opt for a pension fund which pursues a more adventurous, and potentially more volatile investment strategy to achieve a higher yield.
“An achievable level of pension income equates to around 4% of income per annum - therefore based on an annual retirement income of £50,000, your pension fund would need to be worth at least £1.25 million,” notes Pete. “To help you pay off your mortgage or fund that dream holiday, you are eligible to take 25% of your fund without paying tax.”
Start early to build your retirement fund
In an ideal world, everyone would start paying into a retirement plan from an early age. As a general rule of thumb, your monthly pension contributions should be half your age as a percentage, as outlined below.
Simon and Pete cannot stress enough the importance of regularly reviewing your pension plans. Given the current climate they would encourage everyone to look at their pension funds to ensure that their saving plan is still on track to give them what they want.
As Simon stresses, “As we are independent financial advisers, we can research the financial marketplace for the most suitable investment solution based on your current and future plans.”
“Sadly when it comes to retirement planning we cannot turn the clock back,” he admits. “I know that aged 20 saving for my pension was not top of my priority list! However, our help and advice can help to identify any shortfalls and devise additional ways to help boost if necessary.”
One way to help increase your retirement plan is to consider other investments alongside your regular contributions to your pension, such as ISA’s. If you would like to review your current retirement plan, please get in touch with Simon Harnaman or Pete McBride by clicking here and they will arrange a review meeting at your convenience.
Categories: pensions, retirement
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