Confusing jargon, multiple pension accounts, and the fear of starting too late can contribute to a common anxiety about retirement. However, if you’re looking forward to a fulfilling post-work life (and let’s face it, who isn’t?), it’s crucial to tackle these feelings of overwhelm.
Why Retirement Planning Gets Postponed
It’s far too easy to delay planning for retirement. For some, it seems like a distant concern, or the concept of reducing the pace of life isn’t appealing. Others find their existing pension arrangements too complex to understand, or perhaps feel that saving more is beyond their financial reach.
Statistics highlight the severity of this issue: a study commissioned by the investment firm M&G revealed that only 13% of non-retired men and 8% of non-retired women have a detailed financial strategy for retirement. Shockingly, over a third (35%) of individuals aged between 45 and 54 have not even begun to plan for their retirement.
Proposed Solutions for Better Pension Management
M&G advocates for the introduction of pension reviews at critical financial milestones, such as changing jobs, receiving a promotion, or purchasing a home. They propose a simple interactive tool that would help individuals understand their current pension status, demonstrate how different saving options could affect their retirement funds, and indicate when they might be able to access these funds. Such tools would also help engage younger adults in planning for their futures from an early stage.
“We routinely visit doctors for health check-ups and get our eyes tested, but we neglect our financial health,” notes Anusha Mittal, M&G’s managing director of individual life and pensions. She argues that financial health should be given equal priority.
So, while M&G pushes for wider changes to empower individuals, what can you personally do to feel more confident about your pension planning? Mittal provides some expert advice on how to proceed with confidence, even when it feels challenging.
Clarifying Your Retirement Goals
Mittal points out that reluctance to plan for the future often stems from outdated notions of retirement as a period limited to low-energy activities like gardening and reading. Additionally, terms like “old age pensioner” are demotivating. “Retirement is not just a point in time, it’s the beginning of a new phase of life,” she explains. It’s crucial to spend time thinking about what retirement means to you personally, focusing on this stage as an opportunity for financial freedom and personal fulfillment from as early as age 55 (57 from 2028).
This could mean setting goals to learn new skills, increase physical activity, or even change careers.
Optimizing Your Savings Strategy
Mittal suggests regularly reviewing your retirement aspirations and pension arrangements. She likens saving small amounts consistently over time to operating a “personal growth engine,” which requires periodic adjustments to perform optimally.
“If you’re contributing to a workplace pension, make sure you’re taking full advantage of employer-matched contributions, which is essentially free money,” she advises. Additionally, ensure that your investments are suited to your risk tolerance and life stage. If you’re unsure, seek professional advice.
Moreover, Mittal warns against the long-term storage of large sums of money in low-interest cash accounts, as inflation will erode its value. She notes that even modest investments in equity trackers could significantly increase your retirement fund over time.
It’s Never Too Late to Start
If you’re worried that you’ve already fallen behind, Mittal stresses that it’s never too late to seek help and start making changes. “Addressing your retirement planning can lift a great weight off your shoulders,” she assures.
For initial guidance, the government-backed MoneyHelper website offers free, impartial advice, including a tool called Money Midlife MOT. For more tailored advice, consulting a financial adviser could be beneficial, especially if you feel significantly behind.
Starting Small with Savings
Concerns about affordability can be a major barrier to saving for retirement. Mittal emphasizes the importance of viewing saving not just in terms of amounts but as a habit. For younger individuals who may find it challenging to save for the distant future, understanding the principle of compounding—where your savings grow based on both the initial principal and the accumulated interest—is crucial.
Mittal advises making small lifestyle adjustments that can free up funds for savings, such as reducing subscription services or takeaway orders, which can significantly boost your long-term financial health.
Discover how M&G can assist you in transforming the freedom of retirement into a vibrant new beginning.
*Investment values can fluctuate, and it is possible to get back less than you invested.
**Past performance is not indicative of future results.
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