5 Easy Steps To Planning Retirement in the Post-Covid Future

I know. It seems daunting to think about planning for your retirement now, when the short-term is so uncertain. But let me ask you a question...

How well do you understand your own retirement savings?

To put it another way, is planning your retirement something you actively think about, or try to avoid because it’s too complicated?

Anyone who’s worked with me knows my number one pet hate. JARGON! I hate how confusing the different terms and concepts are. Because behind all the complexity, the concepts are actually quite straightforward.

And I think you have a right to understand what decisions you’re actually making - why you’re choosing one investment or pension over another.

That’s why I’ve made this guide – to walk you through the steps you need to take to plan your dream retirement.

That way, you’re part of the decision making process, instead of just having to trust someone else with your future.

Step 1 - Start at the End

What do you WANT retirement to look like?

I would think about this in two stages.

First, think about your basic needs.

Things like paying the rent, paying the bills, basic food and travel. This is about understanding the bare minimum you need to make sure you can live without worrying about money.

Then, expand your thinking - think about what you want beyond the basics.

Do you want a more expensive lifestyle? What does that mean to you? Does it mean more travel - and if so, how often and what might that cost?

Do you want to be able to provide for your family? Do you want to support your children or grandchildren, perhaps with their education, a deposit for their first home, or something else?

Some people find it easier than others to imagine their perfect retired lifestyle.

If that’s you, great! If not, that’s also fine. I’d suggest you start by thinking: what do I not want the future to look like?

Maybe you don’t want to be worse off than you are now. That’s a good starting point - you can look at what it costs you NOW to cover your basic needs. Then you can start thinking about any other lifestyle ‘wishes’ you want to add to that.

This is all about working out what’s genuinely important to you. Not other people, not what your friends want - what you want.

The more detail, the better - it makes it easier to make the right decisions later in the process.

Step 2 - Think about what you have NOW

This step is about understanding what you actually have. It could come in lots of different forms.

People often have more money than they realise. When you really get into it, you might find you have all sorts of money available - you just haven’t been thinking about it because it’s not money in your bank account.

So here is a little list to get you started:

Property

Do you own a house or a flat?

Are you still paying off a mortgage on it?

Owning property is great - it’s a source of wealth to you and, if you own it completely, you won’t have to pay money towards rent or a mortgage in your retirement.

Savings & Cash

You might have savings, in a bank account where you (or someone else) have put aside money over the course of your life.

This savings account could be with the same bank as your ‘current account’ (the bank account you use to pay for day-to-day things like shopping), but it might also sit with a different bank.

E.g. you might have heard of an ISA (pronounced “Ice-er”). This is a special savings account where you don’t have to pay tax on your interest. Do you have money in an ISA?

Finally, there’s whatever cash you have in your current bank account or even stashed under your bed (though I hope not!).

Investments

We’re going to talk more about investments later on. But for now I just want you to think about what investments you might have already.

They will likely be probably in the form of ‘stocks & shares’ or ‘bonds’. I’m going to explain what both of those mean in Step 3 when we look at what money you might receive in the future.

For now, do you know about any investments you have? Have you got shares in a company perhaps?

Possessions

This covers all your possessions - things like your car, furniture, jewellery, etc.

These will be less relevant in saving for your retirement (I’m not telling you you’ll need to sell your precious family jewellery!) but it helps to understand exactly what you have to get a complete picture…  

Step 3 - Think about what money you’ll get in the future

Pensions

Pensions are one of the most confusing and scary areas in finance - and when you get into the nitty-gritty detail, they can be quite complicated.

But when you step back and ignore all those potential obstacles, the principles are quite simple.

Put simply, a ‘pension’ just means a pot of money that you pay into over the course of your working years, so that you have money to live off in retirement.

Where that money comes from (and how much there is) depends on what type of pension it is:

If you have a State Pension, you get a standard weekly amount. It’s usually around £175 per week, but could be different depending on how much ‘National Insurance’ you’ve paid over your lifetime.

If you have a Final Salary Pension, this means that you’ve been paying into a special pension out of your wages while you’ve been working. The amount you’ll get after you retire depends on what your salary is when you retire (or something similar) - that’s why it’s called that.

Investments

Again, investing is an area full of jargon and confusing concepts. You don’t have to worry about all that - just learn what some of the main words mean.

Stocks & Shares - owning part of a company

‘Stocks and Shares’ are when you own part of a company. If you’ve seen Wolf of Wall Street, this is what Leonardo DiCaprio’s character makes all his money from (although he does it illegally!) - buying and selling shares in companies.

How much these are worth depends on how successful the company has been since you got the shares!

How does this relate to money you can expect in the future?

Firstly, if the value of your shares go up, you have more money! It’s as simple as that.

You could sell some of your shares so that you can start spending the money - this is something an investment adviser helps you with.

Second, if the company pays out ‘dividends’ - a sort of bonus payment to its shareholders - you get some extra money. For some companies, especially the larger, more established ones, these dividend payments might be more predictable… 

For now, you just need to understand that these stocks & shares represent future income.

Bonds - when you lend someone money

‘Bonds’ are another main type of investment you might own.

The best way to understand them is that they’re like a sort of I-O-U. By owning a bond, you’ve lent someone (a country, or a big company perhaps) some money and so they owe you your money back, plus some interest.

Maybe you have some investment in bonds… (in which case, it’s nice to think that some country’s government probably owes you money!)

A final question - are there any big withdrawals you need to make at specific times?

This is one reason why good retirement planning is more than just making as much money as possible - it’s about understanding your personal goals and ambitions.

For example,  let’s say you have a grandchild who will be turning eighteen in three years. They want to go to university and you’ve promised to pay a chunk of their tuition fees.

So you know, well in advance, that you’ll need to make a big withdrawal from your retirement fund to do this.

This means you can make sure this withdrawal doesn’t coincide with any other big life events that might make your total retirement fund lower than it needs to be to stay on track for your other retirement goals…

This is just one example, but it helps to illustrate why it’s important to have as much detail as possible!

Step 4 - Choosing a comfortable level of risk

People wrongly assume that financial planning is mainly about numbers and maths: how can you make as much money as possible with what you have now?

Wrong. It’s about emotions.

Why? Because good financial planning is about finding a careful balance between two things:

-       What you want for the future

-       How much risk you can comfortably take

If you can understand this point, you’ve grasped what makes financial advice such a subtle art!

So, Step 4 is about understanding your relationship with risk, by asking yourself a number of questions:

Are you someone who doesn’t mind a bit of risk?

Are you a naturally cautious person, and would rather take the safer route?

Do you feel uncomfortable or nervous when there are big market crashes in the news, or are you ok to ride the storm?

There are no right answers here.

For some people, aiming for the more expensive lifestyle they truly desire in retirement is worth the risk that they might end up with less if something bad happens to the market.

For others, the extra certainty and peace of mind is more important.

Where do you sit on this line?

The answer to this will direct your decision-making in the final Step 5.

This is what makes a great financial adviser - they’re willing to explore this question with you in lots of detail. It’s about looking after your future emotions as well as your money.

Step 5 - Closing the gap

How can you get from where you are now, to where you want to be?

There are plenty of ways to make more money with what you have now. All sorts of questions you can ask.

There might be some low-hanging fruit - easy money to make.

Are you paying the right amount for your pensions?

For example, I’ve saved clients thousands of pounds a year with something as simple as changing their pension provider.

Am I investing in the right things?

This step is a continuous process. It’s about checking how your plan is measuring up against reality. It might need some ongoing changes, e.g. to your investment choices, to keep you on track. You might even find that you’re ahead of your curve!

A Final Step - finding the right Financial Advisor

I hope what I’ve outlined has been useful.  The concepts really aren’t that complicated but it helps to have a decent understanding of the different options and how the markets work.

That’s why you would want a good financial adviser to help you plan your retirement. 

Not to predict the future or to make you as much money as possible.

But to work out exactly the right amount of risk you can bear to meet your retirement goals. And to make any adjustments along the way if circumstances (or the markets) change.

If you’ve got even a basic understanding of what I’ve talked about in this guide, that’s a great start!

What you need now is a great financial advisor to take you through the process.

What makes a great advisor? Someone who’s willing to take time to understand your needs and personality, to make the best decisions for you. Someone who’ll not only help you reach your retirement dreams, but also keep you feeling happy and looked after in the meantime.

I’d love to help you understand it in more detail and put you in the best position possible for your retirement - get in touch today for a free, no obligation chat and I’ll take it from there!