Are You On Track for Retirement?

Retirement can feel a long way away, particularly when you are still working, paying a mortgage or raising a family. But one of the biggest advantages you have when planning for retirement is time. The earlier you understand whether you are on track, the more options you have if there is a gap between where you are now and where you want to be.

Good retirement planning is not simply about asking how much money you have in your pension. It is about looking at your expected retirement age, the income you would like, your existing pensions, your State Pension entitlement, your savings and investments, and the lifestyle you want to have when work eventually stops.

You do not need to be approaching retirement to start retirement planning either. Understanding your position earlier can give you more time to make changes that could have a significant effect over several decades.

What does being on track for retirement actually mean?

Being on track for retirement means having a realistic plan for generating enough income to support the lifestyle you want once you stop working.

There is no single amount that everyone needs. Someone who owns their home outright and wants a fairly simple retirement will have very different requirements from someone who wants to travel extensively, help their children financially or retire several years before State Pension age.

This is why good retirement planning starts with the lifestyle you want rather than a random pension target.

The Retirement Living Standards provide a useful starting point. The latest figures suggest that a couple would need around £22,500 a year for a minimum retirement lifestyle, £45,400 for a moderate lifestyle and £62,700 for a comfortable lifestyle. These figures assume you own your home and do not include housing costs, so they should be treated as a guide rather than a personal target. MoneyHelper provides further information on how these figures can be used when working out your own retirement income.

How much could you need in retirement?

One of the easiest mistakes in retirement planning is focusing entirely on the size of your pension pot.

A £300,000 pension might sound like a substantial amount, but what matters is how that money could translate into income and how long it needs to last.

Your retirement planning should therefore consider both sides of the equation. How much income could you receive, and how much are you likely to spend?

Think about the costs you expect to have once you stop working. Your mortgage may have been repaid, but you could spend more on holidays and leisure. You may no longer have commuting costs, but you could have higher spending on hobbies, home improvements or helping family members.

Your retirement planning should also consider how long your retirement could last. If you retire at 65 and live into your 90s, your pension may need to provide an income for 25 years or more.

Check all of your pensions, not just your current one

If you have changed jobs throughout your career, you could have several pension pots that you have lost track of.

This is where retirement planning can become more complicated. You might have pensions with different providers, different charges and different investment strategies, making it difficult to see the bigger picture.

Finding your old pensions and understanding their current value can be an important first step.

You may also find that some pensions could potentially be combined. Pension consolidation can make retirement planning easier by bringing suitable pensions together and giving you a clearer view of your overall retirement position.

However, consolidation is not automatically right for every pension. Older pensions can contain valuable benefits or guarantees, so they should be reviewed before any transfer takes place.

At Castle Stonebridge, our pension planning service can help you review your existing arrangements and consider whether consolidating suitable pensions could improve the way you manage your retirement savings.

Are you paying enough into your pension?

Once you know what you already have, the next question is whether you are contributing enough.

This is where retirement planning can become particularly useful because you can look at different scenarios rather than simply guessing.

For example, you might discover that retiring at 60 would require significantly higher contributions than retiring at 67. You might also find that increasing your pension contribution by a relatively small amount could make a meaningful difference over the long term.

Employer contributions should also form part of the calculation. If your employer offers increased contributions when you pay more yourself, retirement planning can help you understand whether you are making full use of what is available.

The FCA's guidance on pensions highlights the importance of considering your retirement objectives and understanding the options available to you when making pension decisions.

What about the State Pension?

The State Pension can form an important part of your retirement income, but it should not necessarily be the entire retirement plan.

Your entitlement depends on your National Insurance record, so it is worth checking what you are currently on track to receive.

You can use the GOV.UK State Pension forecast to see how much State Pension you could receive and when you are likely to be able to claim it.

Good retirement planning should include this expected income alongside your workplace and personal pensions, rather than assuming that your private pension will need to fund everything.

It can also highlight potential gaps. If you are not currently on track for the full State Pension, you may have options for improving your position depending on your circumstances.

What if you want to retire early?

Retiring early changes the retirement planning calculation considerably.

If you want to stop working at 60 rather than 67, your pension needs to potentially provide an income for longer. You may also have several years to fund before your State Pension begins.

That does not mean early retirement is unrealistic. It simply means the plan needs to account for the additional years.

This is where proper retirement planning can be valuable. You can look at different retirement ages and see how changing your contributions, savings or investment strategy could affect your future position.

You may discover that retiring at 60 is achievable, that 63 is a more realistic target or that a phased retirement could work better.

The point is not to predict the future perfectly. It is to understand the options you have while there is still time to act.

Five signs your retirement planning needs a review

You do not have to be close to retirement before reviewing your position.

It could be worth looking at your retirement planning if:

You have changed jobs several times. You may have old workplace pensions that you have not reviewed for years.

Your salary has increased significantly. Your retirement target may have changed as your income and lifestyle have changed.

You want to retire earlier. An earlier retirement date could require a different level of pension saving.

You have no idea what your pensions are worth. If you cannot easily explain what you have and what it could provide, it is difficult to know whether you are on track.

Your circumstances have changed. Buying a house, getting married, starting a family or becoming self employed can all change your wider financial priorities and should be reflected in your retirement planning.

How Castle Stonebridge can help with retirement planning

Retirement planning does not have to mean sitting down with a complicated spreadsheet and trying to predict exactly what your finances will look like decades from now.

At Castle Stonebridge, we start by understanding where you are now and where you want to get to.

We can review your existing pensions, savings and investments, look at your expected retirement income and consider different scenarios around your retirement age and contributions.

Our free Financial Health Check can give you an initial view of your financial position and help identify areas that may need attention.

If there is a shortfall, knowing about it early gives you more options. You may be able to increase contributions, review your investments, consolidate suitable pensions, adjust your retirement age or make changes elsewhere in your financial plan.

And if you are already on track, that is useful to know too.

Are you on track for retirement?

The biggest mistake with retirement planning is leaving it until you are almost ready to stop working.

You do not need to have everything figured out today. What matters is knowing roughly where you are heading and checking that your current savings and pensions are moving you towards the retirement you actually want.

Your retirement planning should look at the whole picture, including your pensions, State Pension, savings, investments, contributions, retirement age and expected spending.

If you have not reviewed your retirement position for several years, now could be a good time to find out where you stand.

Castle Stonebridge provides financial planning for clients across Chesterfield, Sheffield and the surrounding areas. You can book a free, no obligation meeting to discuss your retirement plans and find out whether you are on track.

Disclaimer* The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.