A lot of things have changed over the last year. The world seems a very different place from what it was some 18 months ago. Understandably, the fiscal focus has firmly been on protecting the income of those working, with the introduction of the furlough scheme. However, the “drawdown generation” did not escape the pandemic unscathed.
Following on from a decade of quantitative easing, interest rates remain low and as a result, so do annuity rates. Added to the recent turmoil caused by the COVID-19 pandemic, many retirees (or soon to be) have had their retirement plans derailed.
So, in light of the recent pandemic, have you had a change in retirement plans? Anyone planning to retire, we have light at the end of the tunnel.
Derailed retirement plans
The 2020 edition of Interactive Investor’s Great British Retirement Survey saw an increase in people postponing their retirement plans, feeling less optimistic about their lifestyle in retirement and experiencing anxiety about stock market uncertainty. All as a result of COVID.
1 in 8 people surveyed believed they would need to delay retirement plans due to covid. With this number rising to 1 in 5 amongst those aged 60-65. The survey of 12,000 UK adults also found 1 in 4 people feared they might never be able to retire.
However, interestingly the East Midlands was the region where respondents were most likely to view retirement as having a life of pleasure. And we couldn’t agree more when it comes to retirement plans.
Keeping your plan on track
The word retirement is becoming increasingly outdated and narrow. For thousands of years, developments in medicine, as well as changes in economic and social behaviour, have shifted our life stages. Since we’re healthier and living longer, retirement is no longer the end of your working life but the start of your third age.
This new phase comes with its own opportunities, focus, and challenges. Coupled with more time, you can do the things you’ve always wanted to do and see the places you’ve always wanted to see. It’s your chance for an encore of your second age, cherry-picking your favourite parts, or trying something completely new.
However, whilst this sounds great, it comes at a cost; in the recent retirement survey, the main concern among non-retired people was running out of money. And this is why you need a plan.
In an age of uncertainty, your financial choices matter even more, which is why financial planning is so important. It arms you with the knowledge and information you need to make the right choices at the right time.
Last year was difficult for many reasons, and the market crash in early 2020 was one of them. However, as advocates of cashflow modelling, our robust financial plans are always stress-tested for situations like this. Although we couldn’t have predicted the pandemic, we test the worst-case scenarios to give you the peace of mind you need when things don’t go the way you expect.
Stock market uncertainty is understandably a big concern for many retirees, especially after the events of 2020. However, in times of crisis, it’s always important to remember that although we cannot control the stock market, we can take a great deal from the investment lessons of 2020.
Retirement plans post-covid
Whether you’ve had your retirement plans postponed, or they’ve been brought forward due to redundancy, wage cuts or a re-evaluation of priorities, it’s vital to keep your finances in check after reducing or stopping work to make sure you don’t run out of money later down the line.
Here are our top tips for those thinking about retirement plans in this post-pandemic world:
Build a safety net
The first step of any financial plan is having an emergency fund.
It’s a pot of money, set aside in an easily accessible cash account, that has the sole purpose of being available should something in your life get thrown off track.
We recommend having an emergency fund at all stages of life, but it is crucial in retirement. Your income and expenditure will drastically change, and you may find yourself with less disposable income. So, when that unexpected bill comes in, you’ve got it covered.
Check your State Pension
Next up on the to-do list is to check your State Pension Age and entitlement by getting a State Pension Forecast.
The Full State Pension is currently £179.60 per week, but the amount you receive depends on your National Insurance record. The State Pension Age, the age at which you can claim your State Pension, is gradually increasing from 65 to 67 by 2028 but will be under review.
If you don’t have the full entitlement, you can do something about this and potentially top-up your entitlement with voluntary contributions. So be sure to check this out in plenty of time.
Anticipate your next step
Looking into the future, imagine you’ve now retired – what’s next? Where are you retiring to? Do you want to spend more time with your family, go travelling, or maybe study something new? Understanding this will help bring you closer to making your retirement dreams a reality.
If you want some inspiration, why not check out our 10 big ideas for your retirement.
Help yourself first
In most situations, you’re likely to put your family before anything else. If we look at the past year, there has been a significant increase in intergenerational support, with many parents putting their children’s financial well-being ahead of their own. However, helping your loved ones shouldn’t come at the cost of jeopardising your financial future.
We recommend you revisit the UK retirement living standards to gain a proper understanding of how much you need for your retirement plans before you start lending large amounts of money to look after your loved ones.
Watch out for scammers
Amid the anxiety surrounding the pandemic, we saw a steep increase in fraudulent activity. According to the BBC, the police recorded more than 6,000 cases of cyber-crime and covid-related fraud. And of the people surveyed in the Great British Retirement Survey, more than 1 in 8 people reported having been victims of a financial scam.
All you can do is continue to be vigilant and if something doesn’t look or sound right, check it over before taking any action.
Set your plan in motion
So you’re reading this because you’re thinking about your retirement plans. The question is: have you set the wheels in motion? As with any good plan, the earlier you start taking the necessary steps, the better the outcome. And that includes planning for the retirement you want.
You can never be too prepared. If you’d like to know where to start, you can read our previous article on why planning for retirement should start early.
If you have any questions or want to discuss planning for the retirement you want, please get in touch and speak to one of our independent financial planners.
If you’re concerned about when you’ll be able to afford to retire, or you feel your retirement plans have strayed off course, a conversation with one of our financial planners will help you understand your options.