By now, you’ve probably been saving for your retirement for several years, and you might have amassed a few different workplace pension pots. Your 40s are a great time to take stock and start to plan for life beyond the workforce.
And if you haven’t already thought about your retirement plans, with roughly 28 years to go until you reach State Pension age, there is plenty of time to start saving and still achieve your financial goals.
Life expectancy continues to rise, a 65 year old man now has a 50% chance of living to 87, while a 65 year old woman has a 50% chance of living to 90, so you’ll need to consider how much you may need to save to fund a 30 year or longer retirement.
The midpoint of your career is the perfect time to look ahead
If you started working in your late teens or early twenties, you’re roughly halfway through your career, so it’s not too late to start saving for your chosen lifestyle in retirement. With life expectancy increasing year on year and the state pension age on the rise, there’s still time for you to build up a considerable pension pot, although the amount you’ll need to save monthly will be higher than if you had started saving sooner.
You can start to draw a private pension from age 55 (rising to 57 from 2028), so if your aim is to retire earlier than your state pension age, then you’ll need to pay in considerably more each month to achieve your financial goals by the time you leave the workforce.
Preparing for your retirement in your 40s
Your first step should be to work out how much pension income you’ll need in retirement in order to continue living your current lifestyle, or the lifestyle you would like to have:
- Work out how much you’ll need to live on in retirement
Write down your yearly outgoings and factor in any additional expenses you expect to arise, such as increased utility bills and any hobbies or holidays you might like to take. Multiply this annual amount by thirty to get a rough idea how much you should be aiming to save.
- Calculate how much pension income you might get
You can use the government’s retirement calculator to find out how much income you could receive from your state pension and any workplace or private pensions you may have.
- Track down forgotten pension pots
If you’ve previously been enrolled in workplace pensions that haven’t been combined with your current pot, it’s worth hunting them down now, as every little helps and they may contain more than you expect.
Get clear on your financial goals
There’s likely to be a difference in what you’ve already saved in your pension and your target retirement income and this is where professional financial planning is invaluable. At Knowles Warwick Financial Services we offer a Pension Review service:
- Review and consolidate your current pensions
You should always seek financial advice when considering transferring pensions to ensure that there are no loss of benefits, incurred transfer costs or increase in charges.
- Pension forecasting
Using cash flow modelling we can accurately forecast your pension income in real terms, i.e. factoring for inflation, so you can have confidence that the pension investments you’re making today, will be enough for tomorrow.
- Identify under or overprovision
If there’s a difference between your retirement target and forecast we can help find ways of bridging the gap, by increasing investments or reducing current debt, while there’s still time.
Conversely, overproviding for your pension is also an issue. If we establish that you’re already on track to meet your retirement target, it will give you the peace of mind to continue with your current lifestyle without making unnecessary sacrifices.
“Thank you so very much for completing this work. I’m not sure if you can put a value on peace of mind, but if you can then I have to say that was probably the best money I’ve ever spent.”
Remember that the value of investments can fall as well as rise, so you may get back less than you invest. This information is not a personal recommendation for any particular product, service or course of action.