Research indicates that living beyond 100 will soon be the norm – a statement that sounds almost absurd - but the question really is; how would we survive financially in retirement?
‘Living the future life- The implications of a longer life’ is a recent report conducted by the Pensions Policy Institute (PPI), which outlines the ways in which we need to adapt our lifestyles to compensate for our extended existence. Living longer can create a huge impact in terms of financial planning, making it crucial that we begin arrangements for retirement as early as possible. Here we breakdown the ways in which you can prepare yourself for a longer life.
The prospect of living longer means that many of us will be required to remain in employment during later life in order to afford the cost of living. The PPI report outlines how we need to have a shift in mindset in order to adjust to new ways of living and ensure that we remain consistently employable. For example, the report suggests that, ‘individuals can improve their chances of staying in employment that is rewarding by being responsive to new skills and demands and engaging with continuing professional development opportunities.’ Developing our mentality to coincide with the changing social and economic climate means that we can continue to be productive during our later lives, and ensure that we earn the necessary funds to support ourselves in retirement.
In addition to salary, another major benefit of remaining in employment is being able to make the most of workplace pension schemes. It’s imperative that people begin saving for retirement as early as they possibly can. The introduction of auto- enrolment was a valuable way to ensure that younger employees were able to effortlessly do this. Many employers are now becoming more flexible when it comes to pension income. For example, there are local government pension schemes that are allowing members to either reduce their hours or move to a less senior position whilst also allowing them to withdraw accumulated pension benefits. This means that employees are able to continue earning a salary on reduced hours to suit them but also continue paying into their pension.
Another key factor to ensure that we live comfortably in later life is that we remain health conscious. Our wellbeing is what will enable us to continue working into our advanced years and build up savings for retirement. It’s also expected that the cost of long-term care will only continue to increase. As a result, financial advisers will need to place greater focus on financial advice regarding long-term care planning and products which can be used to pay for this, such as annuities, retirement income products and life insurance. According to the report, ‘a lack of regulated financial advice can result in poor decision making and a failure to plan for long-term care can lead to poor outcomes for individuals.’ With this in mind, it’s key that we’re responsible when it comes to our health choices, and that we seek financial guidance where necessary in order to help create a comfortable future.
The report goes on to outline the ways in which housing wealth can also be part of one’s pension portfolio. A key point is the importance for people to live within their means and not splash out on unnecessary purchases. For example, downsizing to a property which is smaller but more efficient and affordable to run can be a valuable strategy for reducing costs. This could result in larger amounts of disposable income to put towards everyday necessities. Housing can also be used as a source of regular income in retirement, such as equity release, taking in lodgers and owning multiple rental properties.
If we’re mindful of all these aspects throughout our lives, this could contribute towards a smooth transition into retirement and mean that we don’t have to experience any unnecessary financial strain. If you’d like advice regarding savings and retirement, give us a call or fill in our contact form to speak to one of our experienced advisers.
This article is for generic information only and should not be constructed as advice. Please contact us before proceeding with any course of action.