23rd December 2013 at 3:05pm
At this time of year, I would like to share an imagined retirement story. It features characters from a Dickens story you’ll recognise.
The Ghost of Retirement Past
Just picture the scene; it’s 1985 and it’s a double celebration for Jacob’s father. It’s his 65th birthday and the last day of his working life. In his hand is the traditional retirement clock and a cheque for his first pension payment which is 2/3rds of his final salary. What a great feeling. He is debt-free and is confident that his pension income will give him a comfortable retirement.
As the scene fades, the Ghost of Retirement Past leaves a message; “Your father’s days of final salary pensions have gone and your need to save for retirement will be very different. Be aware, Jacob!”
The Ghost of Retirement Present
In this scene, you see Jacob, who is 55 and plans to continue working well into his late 60’s, and might go part-time once he’s 70.
Due to redundancy, he has bounced between many employers over his career, building up different retirement pots. His employer is contributing to his pension but it’s not as much as it used to be. In retirement, Jacob will not be a stay-at-home pensioner. He will be active and will be healthier for longer. The state pension scheme will not be enough to fund his lifestyle, and he will need to top-up his own pension to help give him financial independence in retirement. He would hate to have to rely on his children for money.
The Ghost of Retirement Present whispers to Jacob; “you need to take control and write a retirement plan. It’s never too late. A written plan will help secure your future”.
- Write down the sort of lifestyle you want in retirement, to help you figure out how much income you’ll need each month.
- Check out how much you have saved so far.
- Use online tools to help figure out if you’ve got a gap between your current pension savings and the lifestyle you’d like.
- Your plan should also cover the advantages/disadvantages of pulling all your pension pots into one provider, as covered in our earlier Making Pensions Easier than Pi blog.
As this scene fades, you hear: “your future is in your hands, take control and save as much as you can. No matter how small that might be each month. “
The Ghost of Retirement Yet to Come
In the final scene, Jacob is aged 75, has finally retired and is reaping the benefits of his retirement plan.
He is as active as ever and can’t believe he ever had time to work. He says “you know, 75 is the new 60.” His active lifestyle means that his travel costs to work have stopped, but his everyday living costs have jumped, as he travels to see his family, who are scattered around the world: “You know I love them, but grandchildren can be expensive!”
When it comes to your pension planning, which of these ghosts do you recognise? And what could you do today, which could change your retirement of the future.
A personal pension is an investment. Its value can go up or down and may be worth less than you paid in.