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Planning for Retirement

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When your thoughts turn to retirement, how do you imagine spending this phase of your life? Many of us look forward to a more relaxed pace of life, a break from the working grind and a chance to do the things we never had time to do before. Would you like to embark on a worldwide tour, visit neglected friends and relatives, pursue your hobbies or get involved in voluntary projects? With the correct forward planning your individual retirement plans can become reality. However, as our life expectancy continues to improve, so our expected number of years in retirement increases. Whether your retirement is just around the corner or retirement still seems a long way off, it is never too early nor too late to give retirement some serious thought and ensure you are prepared for the realities of being a pensioner.

A vital stage in planning for your retirement is determining how much money you will later need to live on. Firstly, consider if you are currently living at the standard you wish to maintain during retirement, or if there are financial issues that require attention. If you are presently unemployed or have ongoing debts then consider an action plan to deal with these issues before you focus on your retirement. If you are unemployed then take the time to draw up an up-to-date C.V. and visit your local Job Centre for advice and assistance. If you have ongoing debts and are unsure of how to deal with the ensuing financial ramifications then ask at your bank and at Asic for help with managing your repayments.

Secondly, take the time to assess your current annual income and outgoings. You will need to note down any earnings, state benefits and other sources of income to get a clear idea of where your money comes from. Similary, make a note of where your money goes: on what do you spend your income? Consider household expenses such as rent or mortgage payments, food, utility bills and council tax. Are you making any loan repayments or payments to store or credit cards, insurance companies or pension plans? How much do you spend on your children, transport, entertainment and holidays? You should be left with a fairly comprehensive picture of your finances.

Now consider how your outgoings might change when you reach retirement. Will you still be paying for your travel pass, your children’s school uniform and your mortgage? If you will be free from certain expenditures during retirement, reduce your anticipated outgoings accordingly. Which expenditures will remain during retirement? Perhaps dependents, rent, utility bills, rates and taxes, food, entertainment and holidays. Try to imagine what new expenditures there could be when you are retired: perhaps you intend to spend more on travelling and hobbies, or perhaps you are worried that you might need a contingency fund to deal with new or ongoing health problems. You might be aiming spend your retirement years abroad in which case you will have to include the ensuing bureaucratic, accommodation and living expenses.

Once you have an idea of your outgoings in retirement, you will have a clearer estimate of how much money you will need to live and enjoy a comfortable standard of life when in retirement. In addition to the money you will need, it is prudent to ensure you have a separate emergency fund for unexpected expenses such as replacing household appliances. Now consider how long you expect your retirement to last; when are you hoping to retire? How long did your relatives live after reaching retirement age? No one wants to tempt fate, but making an educated guess as to the length of your retirement will help you to estimate for how many retirement years you will need to save. With current life expectancy averaging over eighty-two years for men and eighty-four years for women, pensioners today face potentially more than seventeen years in retirement and these figures are estimated to keep rising.

Above all, women need to take special care to ensure that they will be provided for in retirement. It is important not to rely on your husband or partner to take care of the details for retirement; life is full of uncertainties, and you do not want to be left without any income at sixty-five as a result of death or divorce. Women are often left with the raw end of the deal when it comes to pensions, since many take time out of work to care for children and never return, return only part-time or return full-time but with impaired job prospects. Women are also more likely to have lower paid jobs than their male counterparts: all factors which contribute to fewer pension contributions and limit their chances of eventually receiving an equal, or even adequate, pension.

Once you have an idea of how much money you hope to spend during retirement, you will need to calculate your retirement income and assess whether your Government Pension will realistically provide for your desired standard of living in retirement years. If this is not the case you will need to begin saving for your retirement as soon as possible; use the notes you made on your current finances to calculate whether your income exceeds your outgoings. If this is the case, you should be able to save or invest some of this spare money for the future. If your circumstances change because of marriage, divorce, children or a new working situation, it is important to reassess your calculations for retirement accordingly in light of your new situation. You may find that you need to save more or less money than you originally calculated for retirement. It is always advisable to check your calculations on a routine basis, to see whether your original financial situation or your original retirement plans have changed over time. With the proper organisation and attention you can work to ensure that you head towards retirement with peace of mind.

For more information planning for retirement see:

> Maintaining your Lifestyle

> Calculating Retirement Income

> Closing a Pension Gap

> Tax Incentives for Saving

> Pensions and Family


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