Funding an income in retirement

Whenever you start thinking about retirement planning, it is worth beginning by working out how much income you think you will need. Generally, few people need as much income in retirement as they did when they were working – the mortgage might be paid off, children will have left home, and day-to-day expenses should have fallen.

However, anticipating increased leisure time might spur you to make ambitious plans for travel or family, and all these expectations need to be considered so you can set some realistic targets.

Once you have worked out how much money you need, you can begin to work out where it will come from. For example, state pension, there may be money coming in from ISA’s or other investments, rent from property, or even some continued paid employment. Moving to a smaller main residence could also release some capital – although house prices can go down, as we have seen recently, so it is risky to rely on the value of your house to fund your retirement.

Once completed, you should have a much better idea of the income you need to generate from retirement savings.

Whether you have many years to retirement or less than 5, a worthwhile exercise is to take stock and then take charge of your retirement funding.

The first step is to understand where you are now.

  • How many companies have you worked for?
  • How many offered pension plans?
  • How many plans have you taken out yourself?
  • What other provision do you have – eg: savings accounts, investment plans, perhaps a second house or even your own business.

Then you need to take charge.

Your retirement fund could end up as one of the largest assets you have, but how much is it actually going to pay you? £10,000 might buy you a one-off luxury trip round the world, but it is not so impressive if you need to plan many years of holidays.

Life expectancy for the UK population is higher than ever before so any retirement plans may need to fund your lifestyle for more than 20 years.

It is important to ensure you do not outlive your wealth!

For help and advice please do not hesitate to contact Paul Hoskin at Hoskin Financial Planning.