Charting your financial future

Tackling retirement anxieties requires understanding your current financial resources

Retirement is often seen as the golden phase of life, a period earmarked for relaxation and pursuing personal interests. However, a recent study has pointed towards an increasing trend of ‘retirement anxiety’, especially among individuals aged over 40[1].

This anxiety stems from both financial and emotional concerns, with rising living costs adding to the financial strain. Many adults (39%) fear their savings might not suffice for their retirement years, while 33% worry about affording the activities they wish to undertake.

Evaluating existing resources
The initial step towards addressing these concerns is understanding your current financial resources. This includes pensions, Individual Savings Accounts (ISAs), other investments, and potential rental income. The state pension, which stands at £10,600 for the tax year 2023/24, can also supplement your retirement income. By evaluating your existing resources, you can gauge how close you are to the retirement lifestyle you envision.

Well-thought-out plan
Having identified your potential needs and current resources, the next step is strategising to fill any savings gaps. Unfortunately, the study highlights that 43% of adults have yet to save enough for retirement, and 27% regret not planning earlier. A well-thought-out plan can alleviate these concerns. Remember, pension savings offer 20% to 45% relief depending on your marginal tax rate, and your employer’s contribution can further enhance your retirement fund.

Well-thought-out plan
In today’s economic climate, the study also highlighted that 29% of adults struggle to save for retirement while maintaining their current lifestyle. Regardless of the financial pressures, resisting the temptation to dip into your retirement savings prematurely is crucial. A well-thought-out plan can help you identify areas for potential cutbacks to grow your savings. A good rule of thumb is to allocate 50% of your income to essentials, 30% to discretionary spending, and save the remaining 20% or use it to reduce debt.

Multiple pension schemes
Consolidating multiple pensions into one pot could lower annual fees and simplify management. This process involves moving your pension savings from multiple schemes into one, which can offer several advantages. Having all your pension savings in one place allows you to explore and opt for funds better suited to your financial needs and goals. However, seeking professional advice is crucial before deciding on pension consolidation. Individual circumstances vary greatly, and a strategy that works well for one person may not be ideal for another. Always ensure you fully understand the potential implications of pension transfers before proceeding.

Reevaluating retirement
The rising cost of living and the current economic climate have caused many adults concerns regarding their retirement plans. With 39% expressing worry about the impact on their future, now might be a prime time to reevaluate how you plan to draw your income during retirement. Retirement no longer signifies a complete withdrawal from professional life for many. The research shows that 17% of adults fear being stereotyped as ‘old’ post-retirement, while 14% are apprehensive about losing their identity once they stop working.

Significant life events
Remember, retirement is what you make of it, whether that means kickstarting a new business, opting for a ‘flexible retirement’, working part-time, or choosing a path that brings you joy and aligns with your values. For many, retirement always seems like a distant prospect, even when looming closer than we think. It’s one of those significant life events that can significantly benefit from expert guidance.

Source data:
[1] https://www.abrdn.com/en-gb/personal/news-and-insights/dont-let-retirement-anxiety-push-you-off-track

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

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