Retirement: How to Secure Your Financial Future
- 23 May 2023
Retirement can be a sticky subject for even the most prepared of workers in the UK. With the recent volatility experienced in the UK economy, many citizens are intent on knuckling down and securing the present – to say nothing of the future to come. With a large amount of UK workers expecting to both rent and work until the very end of their life, retirement is slowly but surely becoming a luxury concept.
But it doesn’t need to be this way, nor should it be. Shrewd financial planning can go a long way to securing a strong financial future, even in relatively dire economic circumstances. Indeed, present circumstances should be a powerful incentive to plan well for retirement; the triple lock, safe as it is for the moment, is not the guaranteed safety net it was designed to be. Saving for retirement could not only be the route to a comfortable life, but also a lifeline.
Initial Planning and Pension
In order to bring about the best possible outcome for your retirement, you’ll need to start with an initial plan. This involves reckoning with your existing pension arrangements and making some fundamental decisions about the shape of your life after work.
As a full-time salaried employee, you will already be enrolled in a workplace pension plan; how much of your wage is going to this plan? As a freelance ‘sole trader’, you might have no pension plan at all – in which case, how much can you afford to start putting away?
Indeed, how much – or how much more – you can afford to place in your pension is the main question here, supported by an essential understanding of how much you will need to live well after retiring. Alongside State Pension payments, how much will you need from your pension to live your ideal standard of retirement life? If you’re willing to make some short-term sacrifices and increase your pension contribution, the long-term benefits can be much greater courtesy of compound interest.
Sorting your weekly retirement budget for ongoing grocery, utility and leisure costs is one thing, but larger payments and investments are another entirely. We’ll get to saving and investing shortly, as a secondary mechanism for saving, but first its important to note that one-off costs like post-retirement holidays and home renovations are not typically folded in to retirement budget plans. This can make paying for such things a sore point – and makes financing a viable sub-option for retirement affordability.
For example, equity release is the practice of releasing part of your home’s value as an advance loan or ‘lifetime mortgage’; this can give you the value of your biggest investment up-front, to enjoy immediately and as you please. In certain scenarios this might be a shrewd way to fund once-in-a-lifetime holiday events such as far-flung travel.
Saving and Investing
Financing is always an accessible option for the shrewd retiree, and much more feasible with a robust portfolio of savings and investments beyond the pension plan. With money locked up said pension, it is also wise to ensure there are other channels through which you can access liquid cash. A separate stock portfolio can allow you to grow invested money on your own terms, while a savings nest-egg can be a useful emergency breakwater.