New research we have carried out across the UK indicates that many savers who are planning for retirement are not as prepared as they think. In fact, 41% of respondents admit they won’t be able to fund a comfortable retirement.
In addition, almost half (45%) haven’t calculated their expected retirement costs, thereby running the risk they may run out of money later in life. And despite the high cost of living now, and the persistent threat of inflation, over half (51%) have not factored in the potential impact of rising prices when planning for retirement.
The survey was wide-ranging and consisted of 4,750 UK savers aged 40 and over. The sum we suggest you need for a comfortable retirement is roughly £430,000 based on figures from the Pensions and Lifetime Savings Association and our estimates.
Widespread challenges
Those who haven’t calculated what retirement may cost could face significant challenges. “The alarming reality that nearly half of respondents, who are aged 40 and over, haven’t even considered what they will need in retirement is of huge concern,” says Netwealth CEO Charlotte Ransom.
“In a challenging economic environment, the risk of not being able to afford the type of retirement that you expect is greater than ever. Without adequate planning, you may find yourself having to make difficult choices, such as cutting back on everyday expenses, compromising on healthcare, or foregoing luxuries you had hoped to enjoy.”
Because inflation has been so low for so long – only spiking upwards in 2021 – this may also explain why many respondents have not considered its effects when planning for retirement. “Inflation is another hidden cost which individuals need to factor into their calculations to secure a comfortable future,” says Charlotte Ransom.
“There are some simple steps that people can take to be better prepared. Time is a great asset when it comes to saving – the sooner you begin making pension contributions, the longer they have to grow and compound. Also ensuring your investments are diversified will further aid long-term financial stability and returns.
“If you are already investing, it is vital that you understand the associated fees and whether these pots are working as hard as they can be to accumulate value – all-in fees are the single biggest detractor from final retirement pots and are within our control to avoid. The sooner you take these steps, the better prepared you will be as you head into retirement.”
Practical solutions
A number of factors can contribute to savers not being appropriately prepared for retirement yet knowing about potential stumbling blocks and what you should anticipate can make a big difference.
With these in mind we recently launched the Retirement Readiness Scorecard to help savers gain a deeper knowledge of their own potential outcome. In just two minutes you get a free personalised report to help you understand the key areas to consider as you prepare for retirement, with actionable steps to give you more control over your future.
We also make it easier for you to plan ahead more effectively with MyNetwealth – a powerful online service that lets you track all your investments in one place. It allows you to effectively plan for your financial future and gain detailed insights into how to meet your long-term goals.
With the freedom to explore multiple scenarios, it’s much easier for you to assess whether you might have enough for retirement, whether you need to save more, or whether you need to take other action (such as taking more risk) to help make the most of your money.
Planning for retirement can be daunting enough as it is, but we shouldn’t just assume we are on track or that our goals are beyond our grasp. Greater clarity can empower positive outcomes. Knowing what we need to do – and what we can do – makes a comfortable retirement much more within our reach.
If you need help in achieving your financial objectives, or would value the wide-ranging benefits of impartial professional advice, please get in touch for a free consultation.
Please note, the value of your investments can go down as well as up.
Netwealth offers advice restricted to our services and does not provide independent advice across the market. We do not offer advice in relation to tax compliance, personal recommendations with regards to insurance and protection, or advise upon the transfer of defined benefit pensions. When investing, your capital is at risk.
