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A long and healthy retirement sounds great, doesn’t it?

It’s certainly a goal many of us hope to achieve in the future. And thanks to rising life expectancy, there’s a possibility your retirement could last 30 years – if not beyond. There’s no denying this is a positive thing.

But equally, the prospect of living longer could mean your savings may have to stretch that much further. And – to put it simply – last as long as you do.

That’s why it’s really important to plan well – as early as you can.

Without a crystal ball, we know it’s impossible to guess exactly how long you’ll live for. Yet considering your possible life expectancy can help you plan towards a retirement income that will not only be enough to pay the bills. But allow you to do the special things you’ve worked hard to do.

Louise Allott, Financial Adviser at Skipton Building Society

Planning for a more confident retirement, no matter what lies ahead

Of course, rising life expectancy isn’t the only thing to bear in mind when preparing for retirement. There are other key factors.

The first is long-term care costs.

Not the nicest topic to think about – and hopefully you’ll enjoy a healthy retirement.

Still, it’s important to keep in mind these types of costs in your retirement plans – should you or a loved one ever need care in the future. Especially because they can be very expensive.

Second, inflation (in other words, the rising cost of living).

Over time, the cost of everyday items increases – and products and services you buy now will most likely cost more in years to come. For example, in 1980, a loaf of bread cost an average of 34p. Now, the price of a loaf is over £1.00**.

So, if you were to save your money under your mattress, its value would probably be worth much less when you come to retire. Simply because it’s buying power will be less.

Louise adds, “With this in mind, it’s worth considering keeping your retirement savings in a suitable place – such as a pension or investment – where it has more chance to grow in real terms over a long period. This is providing you’re comfortable with the potential risks involved.”

Third, pension freedoms.

Brought into effect in 2015, the pension freedoms provide more flexibility when using your defined contributions pension.

As the name suggests, you can choose how to access your pension in retirement (currently minimum age 55). Having more choice is of course a perk, but it also means you have more chance to use your savings too quickly.

It’s important to remember that, while you can withdraw the first 25% of your defined contributions pension pot tax free, the rest will be taxed as income. This can eat into your pot if you take too much, too soon.

Can you rely on the state pension alone?

Probably not.

The state pension, if you’re able to receive it (and have made enough National Insurance contributions over your lifetime), is no doubt a useful income boost for anyone in retirement.

Yet relying on this solely is unlikely to help you lead a comfortable lifestyle once you’re retired.

For the 2021/22 tax year, the annual state pension for each person will add up to £9,339.20. This can cover the basics in retirement – but is considered significantly below the average retirement income if you want to lead a decent standard of living.

To live a comfortable retired lifestyle, where you feel financially confident, Which? research suggests both you and your spouse would need a combined income of £25,000 a year. This would pay for basic expenses, as well as European holidays, hobbies and eating out^.

For a more luxurious retirement, £40,000 a year (per couple) would allow you to enjoy long haul trips and a new car every five years.

Take control of your retirement. Plan now

It’s often easy to put off things like retirement planning.

Yet preparing the best you can – as soon as you can – could make a real difference to your future. And help prevent you from worrying about your finances at a time when you should be enjoying life.

Figures from the Office for Budget Responsibility show £180bn is estimated to be saved by the summer 2021 (since the start of the pandemic). If you’ve been in a position to save more money, it’s worth thinking about how you could put it to good use to support your retirement plans.

At Skipton, we’re here to help you with your plans.

  • It doesn’t matter if you’re already retired, are almost ready to retire – or it’s a long way off for you.
  • You could receive support through straight-forward, friendly financial advice.
  • Via our video service, we could help you establish what you want from retirement, take a look at your existing plans. And together, we can develop a personalised plan you feel happy with.

Louise says, “If you already have preparations in place, there’s a chance recent events may have impacted on them. But don’t worry. With our help, you could find out where you stand and what you could do to prepare even more for the retirement lifestyle you want.”

A pension is a long-term investment and your capital is at risk. Your fund value will fluctuate and can go down. You could get back less than you paid in. Your eventual income will depend upon the size of the fund at retirement, future interest rates & tax legislation.

**National Office of Statistics, February 2021

^Which? November 2020

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