How much is enough in retirement for you?

A recent article on the BBC was entitled “Three-quarters of workers not on track for ‘moderate’ pension income, report suggests”. This was based on research from industry body Pensions UK, which estimated that only 23% of current workers will receive an income of at least £32,700 for one person and £45,400 for a couple.

Whenever I read headlines like this, my first reaction is always one of slight concern, because I know how easily these articles can create anxiety for people who may already worry about whether they are doing enough for retirement.

On one level, it perhaps is a useful wake-up call, because as a society we probably do need to have a more honest conversation about whether people are saving enough, whether automatic enrolment contribution levels are sufficient, and whether too many are sleepwalking towards a retirement that may look very different from the life they had hoped for.

But on another level, it is also important to remember that this is still a generic number, based on a generic lifestyle, for a generic household.

And none of us live a generic life!

The real question is not whether you are on track for “the” retirement number, but whether you understand your “own” number.

Financial freedom in retirement is not created by comparing yourself to a national benchmark. It is created by understanding what your future life is likely to cost and whether your pensions, savings, investments and other assets can realistically support it.

That means looking properly at:

• what you spend now,
• what might change when work stops,
• what essential costs may fall away,
• what discretionary spending may increase,
• whether the mortgage will be repaid,
• whether you want to travel more, help children or grandchildren, move home, work part-time, retire gradually…

It also means recognising that retirement is not one neat, fixed period where spending moves in a straight line.

That is why these numbers should be treated as a prompt, not a verdict.

As ever, the answer is not to bury your head in the sand, hope things somehow work out or assume that retirement will look after itself.

The answer (as always!) is proactive planning.  Your usual Old Mill Financial Planner will be pleased to help, or you can read about some of the things you should be considering here Retirement on Your Terms: Five Ways to Prepare Well.

If you have any questions or would like  to discuss your individual circumstances with an Old Mill financial expert, please do get in touch.