Imagine your future – The time for action is now!

In the final article of our series, we discuss the key stages required to help you achieve the best financial lifestyle possible in retirement. Most importantly: how to create a financial plan that will enable you to live in the now as well as in the future. 

1. Assess your current lifestyle

When beginning their financial planning journey, many of my clients have underestimated just how much they spend on day to day living. Larger expenditure such as mortgage, car loan, school fees, main holidays, etc, are no surprise, but they soon discover it’s the little things that mount up. By separating the necessities from the nice-to-have, a clearer picture emerges as to what expenses will be around by the time they retire and enable an assessment of what ‘nice to have’ they would retain, once their employment income ceases.

2. Decide when you’d like to retire

Most of us have a retirement age in mind. This is usually based on the State Pension age, currently 67, but many clients with a financial plan aim for 57 onwards, the age from 2025 most of us can begin drawing our workplace and/or personal pensions. 

As mentioned in Does my NI pay for my State Pension? and Is your workplace pension enough? over the coming years the standard State Pension age of retirement could climb as high as 71. Add to this, the fact that we’re all living longer lives – the Office for National Statistics Life Expectancy Calculator¹, shows life expectancy at 67 for a female as 88, and a male as 85. However, 1 in 4 females have a chance of living to 94, and males a 1 in 4 chance of living to 92.

So, selecting a date you’d like to retire, gives you a meaningful timeline to set your goals to achieve the financial freedom you need.

3. Imagine what your retirement will look like?

This is an important aspect of the planning. Some clients see retirement as the freedom to spend more time with family and friends taking life easy, others have set goals – exploring the World, whether cruising, buying a camper van and touring, maybe planning regular long weekends in the UK or Europe. Some plan to downsize and set up a new home to release capital and enjoy whatever life may offer.

4. Undertake cashflow planning

Many clients, keen to ensure they have enough funds for the retirement they envisage, undergo cashflow planning to establish where they are now. This not only shines a visual light on your current financial position, it also enables the staging of life events such as a wedding, funding university fees, special holidays, etc, identifying any money gaps along the way.

5. Imagine how much you need to retire

When any of us look at where we are today, we may be shocked to learn how little income our savings will provide so it’s important to find out now. This gives us more opportunity to maximise savings in a workplace pension pot, make regular payments into an ISA, understand what other ways we could invest, to take full advantage of the tax benefits that may be open to us. And of course, the earlier we begin saving for retirement, the more opportunity we can benefit from compound interest (interest on your interest over the years).

The Pensions and Lifetime Savings Association (PLSA) analyses the cost of living each year to give savers a general figure they can understand, to enable them to develop their own personal targets based on their individual circumstances and aspirations. They separate out their calculations into Minimum, Moderate and Comfortable standard of living, for both singles and couples.

The PLSA’s latest figures, released in February 2024, show that a single person will need £14,400 a year to achieve the minimum living standard, a rise of £1,600. For moderate, they would need £31,300 a year, and for a comfortable lifestyle, £43,100, which includes a two-week holiday in Europe and several UK mini breaks. For couples, these three lifestyles are currently £22,400, £43,100 and £59,000 per annum².

And of course, living such long lives also comes with challenges. Many of us will need care, a considerable cost at around £700 a week in a residential home and over £850 a week in a nursing home.³ The price will vary according to where you live and the type of care you need.

In Summary

Without doubt, having a financial plan in place to map your life journey as soon as you can goes a long way towards achieving the best financial lifestyle possible, helping you to live in the now as well as investing for your future retirement.

Have any questions? Do get in touch

You can find out more about our Lifestyle Cashflow Planning Service here and read my testimonials to discover how I help my clients manage their financial journey. Lifestyle planning is just one of my areas of expertise, so do get in touch if you’d like a no obligation chat to see if I’m able to help with yours.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

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Sources

1  Office for National Statistics Life Expectancy Calculator September 2024

2  Retirement Living Standards, Pensions and Lifetime Savings Association, 2024. All figures quoted were developed by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA.

3  nhs.uk September 2024