What pension income will I require?
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I celebrated my 50th birthday recently and my wife's is later this year. This has made us start to think about retirement. We are both higher rate taxpayers and enjoy a comfortable lifestyle, but we have no idea what we should be saving for retirement and what would constitute a decent pension when we retire. Can you help?
Douglas Bridges of Smith & Pinching responds:
This is a question many people ask. There have been a number of studies that attempt to come up with what pension income you might require, but the truth is that it absolutely depends on your circumstances, needs and aspirations.
However, a recent study from the Pensions Policy Institute has expressed a concern that 50% of people will have insufficient pension savings to maintain a personally acceptable level of income in retirement.
The key to resolving the question is a detailed financial plan that takes into account your circumstances and puts you on track to put enough aside to meet your needs. I strongly recommend that you take independent financial advice at this critical point in your working life, while you still have time to build your pension savings from your incomes.
A review with an independent financial adviser will be wide-ranging and will consider every factor affecting your financial position, including the suitability and performance of your pension investments. It’s a balancing act to put sufficient money aside for your future security while still having enough to enjoy life now.
Crunching the real numbers is an important part of the advice process: we use tools such as lifetime cashflow planning to help you understand and visualise how your finances will change over time. Lifetime cashflow planning allows us to chart your wealth through a range of different scenarios and will show, for example, if and when you might run out of money during your lifetime. This gives us the opportunity to make changes to your planning as necessary.
Once you have a plan in place, it’s critical to review it regularly – perhaps yearly – to make sure your finances are on track. It can then be adjusted as necessary.
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Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
For more information, please visit www.smith-pinching.co.uk