Can you Afford to Retire?
Nov 26, 2013
Can I afford to retire? A question no doubt thousands are asking themselves this very minute. According to the latest ‘Future of Retirement Life after work’ report commissioned by HSBC, we expect to retire at 65; 4 years later than our parents did, which is hardly surprising considering the longer, healthier lives we live.
Fortunately the reality of working until an older age for many is not an unwelcome one, however 1 in 5 do expect that they will never be in a position to fully retire or leave paid employment; a worrying prospect especially if health issues occur.
Of those already retired, 79% experienced a drop in income but this was not matched by a similar fall in outgoings, a warning to us all that retirement doesn’t come cheap or necessarily lead to the ability to cut costs; so perhaps we should start preparing for a shortfall.
Don’t you find it funny that two critical stages in life, having a baby and retirement are bonded by the same question; can we afford to do it?
The typical response to the question of starting a family is ‘it’s never a good time and you can never afford it’, after all in many cases it’s something you will continue to pay for for the rest of your life! Of course we always ignore the advice and just go ahead blindly, convincing ourselves that there will ‘never be a good time’.
Retirement is something we could be ready for with a bit of careful planning; from reviewing your personal pensions and if necessary topping them up to choosing the right annuity. Of course it doesn’t help when the economic climate throws a curve ball like it has over recent years but as far as retirement is concerned, too many of us bury our head in the sand; think it’s a long way off so not worth thinking about or hope any inheritance coming our way will see us through. Don’t hold your breath!
When asked ‘what was the best piece of financial advice they’d ever been given’, those surveyed said ‘don’t spend what you don’t have’, ‘start saving at an early age’ and ‘buy your own home’; wise words indeed.
So what can you do to make sure you can afford to retire? The following should give you food for thought.
10 Retirement Tips
1. Put plans in place as early as you can and if possible, don’t rely on one source of income
2. Don’t retire too quickly – almost two thirds of retirees surveyed felt they gave up work too early
3. Plan your retirement – making your money work for you takes time and research. Look at all your options
4. Be realistic about your income expectations and how this will impact on your lifestyle
5. Work out how much you need - look at all your outgoings (don’t forget to take into account any future changes)
6. Think about when your mortgage will be repaid and how it may affect your retirement plans
7. Take into consideration future financial impact from family dependencies (children or elderly parents)
8. Include your partner in your plans (how would they cope financially if you weren’t around)
9. Consider other income generating options like part time employment, downsizing or equity release
10. Get into the habit of living to a budget – watching the pennies will make you more conscious of the money you spend and the pennies you can save
If you’re thinking about retiring but don’t know where to start, the Money Advice Service Retirement section contains important information, guides and action plans that will point you in the right direction.
I will also be writing more blogs about your retirement considerations over coming weeks so watch this space.