In this lesson you will learn 💸
- How to work out your life expectancy
- How to figure out what your dream retirement could look like
- How to take your first steps towards making your dream retirement a reality
Do you want to know when you'll die?
In most cases, the answer is a resounding no - who wants to live in absolute fear or absolute risk until they pop their clogs!
However, it's worth assessing your life expectancy to get an educated basis for planning how much money you'll need in retirement. While we might all want to live forever, if we retire at 66 (the current state pension age), forever is a mighty long time to pay for.
📌 To estimate your life expectancy, use a life expectancy calculator. We like the ONS life expectancy calculator, as it gives you an average life expectancy based on your current age and gender, using national statistics as predicting data.
When should I retire and how do I want to spend my retirement?
This all very much depends on what you want to do when you retire, and the means to support your desired lifestyle.
The adventurous retirement: meet Geoffrey and Grania 🛳
Geoffrey and Grania (who are now in their 90s) retired early, or rather, Geoffrey did. At 58, he was offered early retirement, and Grania had been a stay-at-home wife and mother once her first child was born.
They chose to use his defined pension scheme and private pension portfolio to fund seven round-the-world cruises and multiple shorter cruises over 30 years, finally stopping in 2019.
A round-the-world cruise costs roughly £30,000 for two people and lasts 3-5 months. At a minimum, they would have had to have had a pension portfolio giving them £38,000 a year. Over 35 years, that's an estimated pension pot worth over £1.3 million.
How can you choose to retire? ⛱
- Early retirement
- Switching from full- to part-time work, then easing into a full retirement
- Retiring at the recommended retirement age
- Continuing to work well into your 80s
Each option comes with pros and cons - and while you might have a preference, sometimes you have no choice. You may be given early retirement, poor health issues may force you to stop sooner than you want, or lack of a pension may force you to keep working long after you want to retire. Depending on your wishes, it might be helpful to get a retirement strategy in place to help sort your thoughts and define a plan.
The frugal retirement: meet Wanda 👩🏻🦳
Wanda didn't start thinking about her retirement until she turned 53. After taking some time to work her pensions out, she severely lacked funds. She had to sacrifice 60% of her salary to her pension every month, knowing she would be working full time until at least 70 to live in moderate comfort for 20 retirement years.
Not only did this impact a time of her life when she was mortgage-free and could have used the additional savings to start relaxing, but she also had to work harder and longer for a teeny take-home salary to afford retirement. The additional stress took its toll on her health and wellbeing.
If you can, don't be Wanda - it's never too late to start. While it's harder to start later in life, it's easier than putting your head in the sand and not dealing with the financial reality of your retirement when you can.
How can I estimate what I might need?
The University of Loughborough is doing extensive independent research and maintains a very helpful website that is free to use and can help you to get an idea of how your life in retirement might look like and how much money you might need.
📌 Please access the PLSA/Loughborough University Retirement Living Standards directly on the website to see the most up-to-date information.
It's not all about you
If you have a partner and/or children, your retirement and pension plans will include them too.
- With a partner, you should go over pension and retirement plans in detail, and often, to ensure you're aiming for the same things and that both of you are maximising your pension potential.
- Children may need some help from the bank of parents even in adulthood.
- Your parents may need additional support too. A little buffer pot could help ensure you're still safe and have money to give or lend family if you desire.
Key takeaways
You should now have a bit more of an idea of what your dream retirement might look like - or at least what you definitely don't want it to be. From this, you can start to work backwards and create a financial plan - for example, if you've decided what age you'd like to retire, what do you need to do today to make that a possibility tomorrow?
Discover more
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How much do I need to retire?