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What kind of retirement
do I want?
You might have already started thinking about saving for retirement. But have you given any thought to the kind of retirement you want to enjoy?
How do you imagine yourself in retirement?
There are lots of things to consider when it comes to imagining your retired future. And now is the perfect time to start thinking about what you’ll need, what you’ll want and how you’ll ensure you have the money in place to make it a reality. Here are some core questions that are worth thinking about:
- At what age do you plan to retire? The approximate retirement age is 65, though this could rise in the coming years, and retiring at a specific date is no longer necessarily the norm. Log in to your online account to find out how to change your retirement date.
- Will you want to carry on living where you are? Or will you need to downsize?
- What things do you picture yourself doing in later life? Do you want the same standard of living you have now?
- Will you have enough in your retirement pot to afford the basic necessities? Get a clearer idea of the amount you can expect by estimating your retirement income below.
To help you bridge the gap between your working life and retirement, we’ve put together six points you might not have considered.
After a long stretch of time working hard throughout your life, retirement can act as a reward beyond work. For many it can be a time to concentrate on the things that make you happy, such as travel, hobbies and spending time with loved ones. It’s when you deserve to have the freedom to do what you want without having to be too frugal or concerned about your financial situation.
Some people might think of life after retirement as a small period following their main life, but this doesn’t have to be the case. According to The Money Advice Service, ‘retirement can last for 30 years or more depending on when you retire and how long you live.’ This is a significant amount of time and many people even continue working into their retirement.
When you’re no longer in full-time work you should have more time to do the things you enjoy, whether that’s discovering new interests, travelling to new places or eating out, as examples. But whilst you might save some money on things like not having to travel to work, for example, many of these things can cost money. Beyond this, your outgoings in retirement might change to support your care needs or special elderly requirements.
The full state pension is approximately £164.35 a week. Whilst it’s a great starting point for your retirement income, dependent on your lifestyle and needs, it’s possible that you’ll need to supplement it with further retirement savings, such as a workplace pension. Taking such steps might be necessary to afford retirement living costs.
The decisions you make about your retirement need to be based on your household, taking into account any partners or dependants as well as yourself.
It’s common to think of retirement as a time when you’ll need funds for things and activities, but well-being goes beyond this. It’s also a time when you’ll want to concentrate on your health, family, general happiness and avoiding stress. You can help secure all of these for the time beyond your working life by being prepared in advance for the cost of retirement.
Case study: Perry Goodwin, Veterinary Care Assistant, Spring Lodge Veterinary Hospital
Case study: Perry Goodwin, Veterinary Care Assistant, Spring Lodge Veterinary Hospital
Perry Goodwin, 24, is a veterinary care assistant at Spring Lodge Veterinary Hospital in Witham, where he’s saving up to buy a house. Having been enrolled in Nest for a year, it’s his first time saving in a pension.
Even though Perry’s first priority is saving up to buy a house, he also recognises the importance of putting money away for the future. He’s happy that he’s saving in his Nest account, which he feels is so simple, he doesn’t need to worry about it.
"“It’s my first time in a pension scheme. The website is very clear to use”"
Perry Goodwin,
Spring Lodge Veterinary Hospital
Being auto enrolled into Nest means that Perry is able to concentrate on what he needs now, in the knowledge that Nest will be there for him in the future - and he hopes it will mean he can still enjoy some of the things tomorrow that he likes to spend money on today.
Find out your likely retirement income
You might already have an idea of what your retirement looks like, in terms of what you want to do and how you want to live. But without preparing in advance, you may underestimate how much you will need to secure that future.
See how you can grow your pension pot
There’s no need to feel disheartened if you find your current retirement saving plans don’t support the retirement you want to have. There are plenty of things you can do to close the gap and it’s never too late to get started.
Where does the £10,000 annual figure for basic living costs come from?
The Minimum Income Standard for the UK is calculated by how much money people need based on public views about a minimum standard of living that nobody should fall below.
The figure of around £10,000 is for a single person – a retired couple need about £14,300 a year between them.
What the figure includes:
It assumes that during retirement, once your mortgage is paid off, you should be able to afford standard outgoings (food, gas, electricity, etc.). You should also be able to make some personal purchases, have a social life, enjoy a week's holiday, and still be able to pay for everyday technology such as mobile phones and internet access.
What the figure doesn't include:
It does not include things beyond what is seen as necessary for an acceptable lifestyle once you retire, e.g. - a car or TV packages. It also assumes spending on discretionary items, such as eating out, will be fairly low.
If you’ll be paying a mortgage or rent in retirement you will need to factor in these costs separately.
For a more personalised figure that suits you and your family, you can use the online calculator at http://www.minimumincome.org.uk/.
Luxury costs
- 2-week annual holiday. The £10,000 figure for basic living costs already budgets for a one-week UK holiday. If you’d like to enjoy a two-week holiday every year in Europe or the UK, you would have to allow for an additional cost of £2,500.
- Car + 5-yearly upgrade. For a new car worth £14,000, UK motorists annually spend an average of £1,660 on running costs* (and to replace it every five years you'll have to save around £2,800 a year).
*Source: Money Advice Service. You can use the Money Advice Service’s Car Costs calculator to find how much it costs to run a car.
- Social activity. Whether it’s dinner, drinks or attending a show, the £10,000 figure includes a budget of £40.68 per week for activities. However, if you enjoy going out more regularly we’ve estimated an extra £3,000 per year, assuming 4-5 outings per month.
- Shopping. Only food shopping is included in the £10,000 basic living costs figure – for non-food items such as clothing and electronics we've estimated an annual figure of £1,500.
- Gym membership. The average annual gym membership costs around £400 a year.
- Home improvements. One percent of the home’s purchase price is commonly set aside each year for ongoing maintenance. The average house price in the UK is currently about £320,000 (May 2018*), so we have allowed for £3,200 per year for maintenance.
*Source: Zoopla https://www.zoopla.co.uk/house-prices/uk/