Research has shown that over 40% of people who don’t have a pension say they simply haven’t gotten around to it or will do it at a later stage. Planning for retirement can feel daunting, or something to be considered at another time. But many people who put off starting a pension regret it later, especially as retirement approaches. The reality is that your pension should be part of your thinking at every stage of your life, not just the run-up to retirement.
Ensuring you keep a focus on your pension throughout your life will help ensure you are financially secure in retirement. Breaking it down by life stage makes it more manageable. There are different considerations depending on whether you are in your 20s, 30s, 40s, 50s or 60s. So, here’s our easy guide to what to think about for your pension at every life stage.
IN YOUR 20S: LAYING THE FOUNDATIONS
Your 20s are all about building financial habits that set you up for the long term. Starting your pension is one of those habits. By including your pension as part of your budget, you’ll be able to make even a small contribution. These benefit hugely from compound growth. Understand your employer scheme, if there is one or what your other options are and how to maximise your contributions in a tax-efficient manner.
IN YOUR 30S: BUILDING MOMENTUM
Your 30s can be a busy time with numerous draws on your finances. It may be a time of career growth but also family and a mortgage. But it’s crucial to stay consistent with your pensions. Balance your short- and long-term goals and try not to pause your pension as it will be harder to fill any gap in the future. Increase your contributions as your income rises, even a 1% increase can make a significant difference over time.
IN YOUR 40S: STAYING ON TRACK
Your 40s can be a pivotal decade for pension planning. Review your progress and see if you’re on track for your desired retirement lifestyle. It may be a time to give your pension a boost using an Additional Voluntary Contribution (AVC). Perhaps even diversify some of your retirement savings and keep an eye on performance, charges, and fees to ensure they are not eating into your retirement pot.
IN YOUR 50S: REFINING THE PLAN
It’s now time to get a clear retirement income forecast from your combined resources – pension savings, expected state pension and other income sources. Also review the risk level of your pension investment and protect your savings by shifting to lower risk options. Once you have a handle on your situation, it may be time to look at when you retire and whether you can transition at an earlier date if that appeals to you.
IN YOUR 60S: PREPARING TO RETIRE
Now retirement is just around the corner and your pension savings turn into income. Consider the lifestyle you want, any travel or part-time work. Is your mortgage paid? Decide how to access your pension and the tax implications of each option. Check your state pension entitlements and what is required to access those. Remember to plan for longevity, your retirement is only the beginning of a whole new stage of your life.
WHAT NEXT?
Pensions can feel complicated, but the key is consistency and awareness. There are slightly different things that matters at each life stage. From building habits in your 20s is building habits, to growth in your 30s and 40s. Then preparation in your 50s and 60s. Remember throughout each life stage keep a track on your old pensions as each of these can add value to your overall fund. Also ensure the funds you are invested in are performing as you expect.
For help with your pension planning and strategy at any life stage, contact our team today and together, we can develop a plan that supports your objectives for today, tomorrow, and the future.
