| Let's
face it, few of us want to get old. What we do want, though,
is some sort of plan to make sure that, when our pay cheques
dry up, we've got a big enough pot of money for us to do the
things we want. So, usually we look for some sort of pension
plan and pay into it on a monthly basis until it's time for
us to retire. Your pension fund manager invests it in the
stock market and, on retirement day, hands you the pot of
money he's managed to make for you. |
| The
trouble is sometimes that pot of money isn't enough to pay
for 20 or 30 years of easy living and it's usually because
we've thought about things the wrong way round. We tend to
think about now rather than then. Not surprising, really,
as it's rather hard to see into the future, but the future
is actually where we should start so we can then work backwards
to the here and now. |
| What
we need to ask ourselves are these questions: |
| 1.
When are our pay cheques likely to stop? |
| 2.
What is it that we want to have and want to do in retirement?
|
| 3.
What would be enough money for us to achieve this? |
| 4.
How are we going to go about getting this pot of money together?
|
| Providing
for your retirement means balancing a number of factors, and
it's important to see it this way from the start. The earlier
you want to retire, the fewer years you have in which to save
your pot of money. And, of course, the less time you have
in which to save, the more you'll need to put aside each month. |
| You
might say that you should save as much as possible so that
you can simply retire when you decide that you have enough.
Unfortunately, this makes little sense either. |
| What
is saving as much as possible? Should we live on cornflakes
and take no holidays until retirement? It might enable you
to retire early and with a huge pot of money, but it wouldn't
do much for your health and you probably wouldn't know what
to do with the money when you did retire. |
| Similarly
it would be miserable to retire with a much lower income than
you've got used to living on. So, you have to live for the
present and save for the future. Putting together a retirement
plan is about striking a balance between the two. |
| The
answer is to aim for a retirement that maintains the standard
of living that you've got used to during your (and/or your
partner's) working life. There is no point in saving extra
to give yourself a higher standard of living in retirement
since, apart from anything else, you may not make it that
far. It would also be miserable to spend your later years
having to cut back on the luxuries that you had got used to. |
| If
you are able to answer a few of the "what if" questions ahead
of events, then you'll be in a far better position to deal
with things if the "what ifs" actually come to pass. |
| What
if I get made redundant in my early fifties and can't find
another job? What if I decide to have more children and need
to take career breaks? What if my investments don't grow as
quickly as I'd expected? How likely are these things to happen? |
| A
good retirement plan takes into account these sorts of events,
and their likelihood of occurring. So, at every stage of the
planning process, you need to be thinking not only about what
you expect (and/or hope) to happen, but how likely it is that
things will work out differently and by how much. A good plan
is also monitored and tweaked, as the "what ifs" turn into
"whens" or "definitelys". |
| In
fact, many of us have pensions, through work or privately,
but these are unlikely to provide the full answer to our retirement
needs and some people will find that other forms of saving,
like ISAs we talk about elsewhere, will serve them better.
One thing is for sure - pensions are complicated , so please
look at our pension section for further advice. |
