Tag Archive: retirement

  1. How much should you be saving for your retirement?

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    How much should you be saving for your retirement?

    In most cases, the answer to this question is more than you’re putting in now! The minimum that you should be putting aside for your retirement plans, if you’re free of unsecured debts like credit cards and loans, is 12.5% of your income.

    But why 12.5%? Because it’s the first hour of an eight-hour working day, so the first hour you work every day goes to paying yourself before anyone else, including HMRC. That’s not the maximum proportion I recommend – it’s the minimum. If you’re nowhere near 12.5%, then it’s a case of trying to build up to it.

    An important step in doing that is to cut out all unnecessary expenses and follow my Bank Account System to reduce your outgoings.

    Mindset matters

    There’s no hiding that 12.5% is a chunk of anyone’s income, and we need to enjoy life now as well as in the future; we want to take holidays, have a great Christmas with the kids, enjoy new experiences – retirement is not the target of our life.

    12.5% is a starting point. Some people will think, ‘no problem’. Others will think I’m off the planet, because every month they have more days left over than pay cheque.

    That comes back to step 2 of my book The Money Plan: get financially well organised. You’ve got to know what you want in life and have a plan in place to get there. You’ve got to get your mindset right, which is why I spend about one-third of The Money Plan on financial mindset. It’s that important.

    If you are miles away from your targets, go through your expenditure items and see if you can squeeze them down. Look at all payments coming out of your account and ask the holy trinity of questions about each: do I need this, do I want this, can I get a similar experience for less elsewhere?

    You’ve got to plan for your future, and 12.5% is just the start; if you’re in your 50s or 60s with little in your pension pot, you’ve got to make big sacrifices to put more away so you can make your pension income last longer in your retirement.

    With that said, I’m realistic. If your employer pays a significant contribution to your pension, say 10% or even 15%, then that can make a big difference. You might even decide to redirect your savings onto your mortgage.

    The 40/40/20 principle

    After all unsecured debts are repaid and the financial fundamentals such as emergency cash, a will and power of attorneys are in place, I refer to what’s left over between your income and expenditure as a snowball, a surplus.

    A good way to be financially organised is to take that snowball and allocate it 40/40/20: 40% goes to overpaying your mortgage, 40% goes into your retirement plan, and 20% goes back to you to enjoy today.  I repay 20% back to enjoying today because I strongly believe that although we need to plan to ensure we have sufficient income for when we decide to stop working and retire, we should not live our life for our retirement – for the last quarter of our life, the 40/40/20 rule helps us achieve this financial balance in life.

  2. Working Beyond 65

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    The proportion of those aged over 65 still working is close to 11%.

    Source ONS 11/9/2018

    The latest unemployment figures, for the May to July 2018 period, showed the employment rate for those aged 16-64 was 75.5%, slightly lower than in the previous three months, but up 0.2% year-on-year. A closer look at the figures shows that the total numbers employed rose by 261,000 between May-July 2017 and May-July 2018. Of this increase, 99,000 were aged 65 and over – an annual increase of 8.5% in the employed over age 65.

    Drill further into the data and, as the graph above shows, the overall increase in workers aged 65 and over is being driven by a growth in the number of women working into (theoretical) retirement. This hit a record level of 8.1% in the latest period: ten years ago, it was only 6.4%.

    The graph shows a clear upward drift for both sexes from the start of the millennium. There are many reasons behind this trend, but one is undoubtedly that some people are having to work to finance their lifestyle, a point worth making to any client reluctant to review their pension provision.

  3. Auto-Enrolment – It’s Here And It’s Happening!

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    It is a fact that people are living for longer. There are currently 13,000 centenarians in the UK, but this figure is expected to reach 500,000 by 2066! (more…)

  4. How Long Will You Live?

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    Life expectancy plays an important role in financial planning. It influences decisions about how much to save, invest, and/or insure to cover retirement, healthcare, long-term care, and other needs that may crop up over the course of a lifetime. Of course, there are some important nuances to life expectancy. (more…)

  5. Retirees: Don’t leave joy in the Bank

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    When you have retired, your goal is to expire before your bank account does. The easiest way, of course, is to take up juggling hatchets. 

    A more moderate solution, however, is to try and  figure out how much you can withdraw each year – a tricky calculation at best, since you know neither what you’ll earn in any given year, nor what the rate of inflation will be, nor how long you’ll live.


  6. When I’m 64……

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    The number of people aged over 65 in work has reached a new record. 

    There are now over one million people in work aged 65 or over according to the latest statistics from the ONS. That represents nearly one in ten of the 65 and older population – more than double the proportion at the start of 2001. There has been a steadily rising trend, seemingly immune to the vagaries of the UK economy since the turn of the millennium.