How to Plan for Retirement: A Comprehensive Guide

Planning for retirement is one of the most significant financial and life decisions you'll make. It's not just about setting aside money; it's about envisioning the lifestyle you want to lead and creating a roadmap to achieve it. It’s important to think about your long-term future wherever you are in your career, whether you’re just starting out or midway through. The decisions you make throughout your working life will impact when you retire and how comfortably you live once you stop working.

This comprehensive guide will walk you through the essential steps of retirement planning, from setting clear goals and understanding various retirement accounts to managing investments and anticipating future expenses.

Checklist for Effective Retirement Planning

Everyone’s retirement plan is different, but there are a few key components to consider when you are planning for retirement and your future. This includes the following:

• Your desired retirement age — when do you want to stop working? How many years will you potentially be living off your pension and savings?
• Lifestyle expectations — what expenses will you spend on hobbies or holidays? Will you want to move in the future?
• Basic expenses — consider monthly expenses such as food, utility bills and petrol
• Unexpected expenses — it’s a good idea to have enough savings to cover unexpected fees such as car repairs and vet bills on top of your usual spending
• Income sources — where will your income be coming from? Consider various pension sources, savings accounts and ISAs

Find Out When You Can Retire and Plan Accordingly

Although most people are entitled to a State Pension once they reach a certain age, this doesn’t necessarily mean this is the point you should retire. Some people have enough savings to retire earlier, while others need to continue working past State Pension age to fund their lifestyle.

The key to planning for retirement is to work out when you can access your pension and therefore how much money you’ll need to save. If you want to retire early, you’ll need a larger pension and savings to accommodate the additional years you’ll be using money from your pension.

You can check your State Pension age on the government website to find out when you qualify for your State Pension. It’s also advisable to check how much pension you could get to factor into your financial calculations. You may be eligible for other financial support if you are on a low income, have a disability or are claiming benefits.

Aside from your State Pension, you should also look at your personal pensions and work out how much money you will need to have saved to retire. Some workplaces will let you access your pension earlier, which can be a factor in your retirement plan.

Options Available for Increasing Your Retirement Plan Pension

The obvious choice for increasing your pension is to delay your retirement so you can put more money into your pension and savings. You can also make voluntary National Insurance contributions. This will cover periods of time when you didn’t make National Insurance contributions because you were on a low income, were unemployed, self-employed with low profit or if you lived abroad. You may choose to make voluntary contributions so you have enough qualifying years to get or increase your State Pension.

Review Financial Support Options for Your Retirement Plan

There are options to help you if you’re on a low income, need help paying bills or have a disability. You may be entitled to council tax reductions, housing benefits, and help with urgent or one-off payments. Pension Credit is designed to top up your income to a guaranteed minimum level if you’re on a low income.

While you can try your utmost to factor in all costs in your retirement plan, some expenses may fall outside your pension pot. This doesn’t mean that you have to go without, though. Low APR loans can help you get money for additional spending in your retirement (such as holidays and car repairs) with low interest rates.

You may want to make home renovations during your retirement. However, this can be difficult if you haven’t factored the additional costs into your retirement plan. In this instance, home improvement loans can help you fund home renovations without needing to take a large chunk out of your retirement pot at once. You can pay the loan back gradually while you benefit from the new additions to your home.

Get Expert Advice on How to Plan for Retirement

You can contact a financial advisor if you need help with retirement planning. They will help ensure you have considered all bases to help you learn how to plan for retirement. Financial advisors will consider your current income and outgoing expenses to calculate when you may have enough to retire. They will ask about your various pensions, savings accounts and your lifestyle expectations for when you retire.

Retirement Planning FAQs: Everything You Need to Know

When should I start planning for retirement?

It's never too early to start planning for retirement. Ideally, you should begin as soon as you start earning income. The earlier you start, the more time your investments have to grow. Don’t worry if you haven’t started your retirement plan, though. You can start collating information about your pension and savings at any point to work out when you may be able to retire.

How much money do I need to retire comfortably?

The amount needed varies depending on your lifestyle, location, and expected expenses. A common rule of thumb is to aim for about 70-80% of your pre-retirement income. However, it’s important to factor in additional costs such as moving, holidays or any other expenses you predict you’ll have when retirement planning.

What should I do if I’m behind on retirement savings?

If you’re behind on your pension and savings, you might want to consider delaying your retirement to increase your savings and pension pot. You could also try to cut your outgoings by spending less on non-essentials such as holidays.

Is it better to downsize or relocate in retirement?

Downsizing or relocating can reduce your living expenses and free up equity. However, the decision may depend on factors such as the cost of living, proximity to family, and lifestyle goals. You could try to look at smaller properties in your local area or relocate entirely to a cheaper area.