In the UK, the demand on the amount of our lives we spend grafting and earning seems to increase all the time. When the time to stop eventually comes around, we all deserve to put our feet up and enjoy a relaxing retirement. However, as with all significant events in our lives, a truly rewarding and uncomplicated retirement can only be achieved with careful planning and budgeting.
We understand that being advised to ‘plan ahead’ can be frustrating. The obvious questions arise: how long do I plan for? What do I need to factor in to my retirement budget? How do I actually go about saving for a life without a salary or regular income from a job?
The first point to be aware of is that you cannot prepare too long for your retirement. Consider your potential financial future several years in advance of the time you would ideally like to stop working. That way, you are more likely to be able to finish your job when you want to, and you’ll be more comfortable in your retirement too.
What this means in practice is dedicating time and effort to working out where your retirement income will come from, and how much it will add up to. Make sure you fully understand your pension plan with your current employer. Look at your annual pension statements to work out how much you have been saving and for how long. Then, ask for an estimate of the amount of State Pension you will receive. The UK government website has a useful State Pension calculator that allows you to do this, or you can call/send an application form to the Future Pension Centre. Additionally to the above actions, factor in any assets or investments that will generate future income. Being ‘in the know’ about your likely pension income is an absolutely essential part of planning for retirement.
Try to be extremely clear-sighted about the best time to take your retirement. It can be tempting to hurry your freedom from work, but being too hasty might not be right for you. Taking the decision seriously will pay off in the end. If your personal retirement budget shows you that your forecasted retirement income might not be enough to sustain you, you will probably want to delay retirement until it becomes affordable. If you feel it is within your means to do so, speak to your employer about increasing your pension contributions in the run-up to retirement or start putting more money aside in savings.
Be aware that even the most careful budget can be disturbed by unforeseen situations and circumstances beyond our control. If you need short-term help with essential financial needs while you are saving for your retirement, look into a short-term loan from MYJAR.
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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk