This is a question I frequently get asked, with the follow up question being how much do I need to save to achieve this?
The further you are from retirement the harder the answer to this question as there are so many variables that can impact what you need. What is your likely expenditure going to be? How much will everyday items have increased by? Will current legislation change which may impact how your retirement income is withdrawn/taxed?
In addition, when in retirement you may have a lot of additional time on your hands and therefore potentially an increase in expenditure. Having said that a lot of retired people I see tell me they have never been busier! Plus, there is the consideration of the additional holidays and ticking some items off the ‘bucket list’.
All of these cost and need to be built in to any financial plan to ensure you have sufficient funds to be able to do all the things you want to do.
Generally speaking, expenditure tends to increase in the early years of retirement as more holidays are taken and people are more active. This then plateaus out before the potential cost of any Long Term Care and thus an increase in expenditure.
At Wingate, we use Cash flow planning to help build your financial plan for the future. By inputting your estimated income and expenditure, both pre and post retirement, we are able to show the levels of funds you could have at retirement and if there is any shortfall. We can also include any expected ‘windfalls’ or ad hoc expenditure to provide a realistic picture as possible.
Once we have completed your financial plan, we can look at how to address any potential shortfall. An obvious answer is to start funding now or increase any existing contributions but this needs to be affordable to you. By using the cash flow system we are able to demonstrate the impact this would have and also thus start working out how much you need to save to achieve your retirement goals.
A financial plan should not just be a one off. It should be reviewed on a regular basis to not only ensure you remain on track, but to take account of any future changes in your personal circumstances, objectives and legislation.
Importantly, it is never too early to start planning for the future!
If you would like to discuss planning for your future in more detail please do not hesitate to contact me.