'People put their heads in the sand' with retirement says expert
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Scrimping and scraping to make ends meet is no fun at any time of life and it’s not something that people will want to be doing when they retire. Planning for retirement now will help Britons ensure they have enough money to enjoy their older years, and for most people, that would probably also include holidaying abroad once a year. According to the Pension and Lifetime Savings Association (PLSA) it’s going to cost £20,000 for an individual to live what it calls a ‘moderate lifestyle’ in retirement and that includes the cost of two weeks away in a sunnier climate.
As well as a two-week holiday abroad, a retirement fund of £20,000 a year should also help pensioners live a more financially free and flexible life, provide them with some money to pay for help and maintenance around the house and enable them to spend £46 a week on food shopping.
Of course everyone’s idea of retirement looks different, but the PLSA’s Retirement Living Standards model also factors in the fact that a single person might buy a three-year-old car every ten years, spend around £750 on clothing and footwear and like £30 to treat loved ones on special occasions like birthdays.
Retiring as a pair puts less of a strain on someone’s finances – for a couple to live a ‘moderate lifestyle’ they would need £30,000 a year to live on between them which would cover the above requirements.
It’s hoped these guidelines will help cut through the confusion surrounding retirement planning which can be a minefield for many.
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A study by the PLSA to coincide with Pensions Awareness Week which runs until September 17 found that almost half of people (46 percent) asked didn’t know how much they would receive when they retired.
To clarify, a full state pension is worth £9,399 which is just short of the £10,200 a year the PLSA states is needed to achieve the ‘minimum living standard’.
Living this way will mean having no car, but one will be able to pay for one room a year to be decorated, as well as a £38 a week food shop, a week and a long weekend holidaying in the UK every year, £460 for clothing and footwear and £10 for every birthday present.
However, for two people to live to this standard, it’s easier again – they would only need to be taking home £15,000 a year between them.
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How much do I need to retire?
- £10,000 a year for the minimum living standard
- £20,000 a year for moderate
- £30,000 a year for comfortable
Couples will need:
- £15,000 a year to achieve the minimum living standard
- £30,000 a year for moderate
- £45,000 a year for comfortable
Rebecca Williams, Head of Wealth Planning at private bank Brown Shipley said there are a number of factors individuals should consider in the run up to retirement.
She said: “Many people enjoy the opportunity to travel and pursue active hobbies in the early years of retirement and spending tends to be higher to reflect this.
“Although spending on active pursuits may fall in later years there may be a need for care, either at home or residential, which presents a significant income need.
“A review of your overall financial position, including pensions and investments will ensure that your finances continue to be structured appropriately for retirement.”
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In addition, according to experts, planning for retirement should include a reappraisal of investment risk tolerance to check if someone’s attitude to risk has changed over the course of their life.
Meanwhile, more than 15 million Britons have no idea what their spouse’s pensions are worth, according to latest research.
Liverpool Victoria has revealed that more than three-quarters (78 percent) of non-retired married people have no idea what their spouse’s pensions are worth, while nearly half (47 percent) have not spoken to their spouse about their retirement plans.
They are being encouraged to start the dialogue, as planning for retirement as a couple can be beneficial.
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