A lot of people don’t give retirement planning a single thought until the day they leave work for the final time. This is most certainly a mistake. It’s very easy just to forget about it and put off thinking about it again and again until that fateful day when you reach 65, but unless you’re planning a Logan’s Run style exit, you will need to prepare for this period of your life.
For young people in particular, it’s very difficult to see why: it’s such a long way off, surely I can do something about it closer to the time? There are things that can be done closer to the time, but the earlier you start the better.
The simple fact is that more people are living longer. This is putting a strain on resources as a growing section of the population is not working and so not contributing as much tax, whilst the same growing section of the population is claiming state pensions and inevitably putting more of a strain on state healthcare provisions. This means that the state is having to pay more money out for less money in. Short of raising taxes for those not of pensionable age (a disastrously unpopular move), there’s not an awful lot a government can do to alleviate the situation, and it’s a situation that is only getting worse as our standard of living increases along with medical advances allowing people to live for longer.
Without dismissing the wider societal issue, this means that there is a greater importance on making provisions for yourself as an individual. The help you will receive from the state is likely to diminish as time goes on, so you are likely facing a period of 20-30 years with only a meagre income, unless you plan to work and/or have made ample savings for yourself.
If you are a long way off from retirement, it will be very difficult to ascertain exactly how much you need to set aside for yourself, as the benefits you receive will likely be very different from what people receive now. Similarly, the cost of living will be completely different. However, it’s still worth contributing into a pension now, or making alternate savings arrangements.
If you are closer to retirement age, it’s not too late. There are investment options that can help you build a nest egg which will see you through your retirement. If you can identify how much money you are likely to need, how much you need now, and how much you can set aside, you may be able to make substantial investments that will pay out significant amounts of interest that you can perhaps re-invest, giving you a sustainable source of income without the need to continue working past retirement age.
Whatever stage of life you’re at, and whatever your current financial situation, financial planning for retirement is an absolute must to make sure you can enjoy your twilight years the way you’ve always wanted to.