It’s a question we ask our clients regularly, or more specifically, we ask clients to anticipate what their expenditure will be, so that we can determine what level of income they will need and how this should be generated.
However, if you’re yet to retire, this can be a challenging task. A lot of people don’t know how they will spend their time when they stop working and therefore how much money they will need.
Research carried out by a pensions industry body published this week has suggested that in order to live a ‘moderate’ lifestyle in retirement, an individual will need £31,200 each year and a couple will need £43,100.
The Pension and Lifetime Savings Association (PLSA) has reached these estimates using evidence from focus groups. The calculations are then developed and maintained independently by the Centre for Research in Social Policy at Loughborough University.
As well as general increases in the cost of living, the research suggests that priorities have changed since the pandemic as people place more importance on spending time with family and friends out of the home.
Included in a ‘moderate’ lifestyle is the ability to have a monthly meal out with loved ones and being able to help family members financially, such as paying for grandchildren’s activities.
I think research such as this can be helpful in ensuring we are realistic when planning our retirements; about how much income we will need and therefore how long we should be working and how much we should be saving.
However, what someone spends their money on varies greatly from person to person and that’s why it is important to set goals and budgets that are individual to you. That’s where we come in.
Once you’ve worked out what you spend now, we can help you work out how much you will likely spend in retirement. We can then recommend how much you should be saving now and into which products; pensions, ISAs, etc. Using cash flow forecasting software, we can also show you the impact of different actions, such as spending more, working longer, etc.
If you are already retired, regular reviews can determine if you are spending less or more than you thought and we can recommend the most tax-efficient way of generating the income that you need.
Whether you’ve already stopped working or are yet to retire, we can give you the confidence that you are on track to meet your objectives and if you’re not quite there, we can discuss with you what changes you need to make.
If you have any questions about income in retirement, please do contact your Financial Planner.
Just a reminder for any contributions you’d like to pay in this tax year, please do get in touch with us prior to the 5th March 2024 to allow us enough time to implement your request.