Not a week seems to go by without me reading that, “in order to live a comfortable lifestyle in retirement, the average person needs to have accumulated, on average, a pension pot of….£X”.
When did you become average?
Surely the amount you need in retirement depends upon:-
- What age you want to retire.
- Whether you have guaranteed income from pensions.
- How much money you have invested outside of pensions.
- Whether you have other income e.g. rental income.
- Your health.
- When will you begin drawing your pensions.
- How you want to live your life.
- Whether you are likely to inherit money.
- How much tax you are you likely to pay.
- Which part of the country you live in?
There are many other considerations but the answer to the question “how much is enough” has to be dependent upon your own unique circumstances.
I understand why guidance is given and of course big numbers attract big headlines but many people take the figures too literally and carry on working unnecessarily. New clients I met recently were under the impression that they had to carry on working until they were aged 70 because ‘the word in their office’ was that it wasn’t worth retiring until they had accumulated £1 million pounds in their pension pot!! Some good spin from the employer perhaps!
We embarked upon the Blue Sky Financial Planning Programme and I was able to show them that, not only did they not need £1 million pounds, but that they could afford to retire at age 55. Furthermore, the return required from their wealth in order that they didn’t have to work again, was only 1.75% a year. Why? They had other assets and income from a property, along with a trust. Planning allowed them to benefit from tax allowances each year up to the age of 55 and then draw the money they needed from different pots in a tax advantageous way.
Another couple in a not dissimilar situation may have ended up with a completely different time horizon and returns required, because of their unique circumstances. So, my message is “don’t be a slave to supposition”. Take control and find out for yourself, how much is enough. Don’t let others tell you how much you need and don’t let the media dictate how you think about the future.
