How to plan for a comfortable retirement as we live longer?

People in the UK are now living longer than ever before. Although this is good news, it also means we need to plan for a comfortable retirement that could last decades.

With the loss of a regular income, we must plan for a comfortable retirement by building enough savings to support our lifestyle.

The sooner we plan for a comfortable retirement, the more peace of mind we will have. Here, we discuss some simple steps to help ensure a comfortable retirememrnt you can feel confident about.

Start saving early for a comfortable retirement

The earlier you start saving, the less you have to worry about as you begin to near retirement.

Einstein once described compound interest as the ‘eighth wonder of the world’.

The power of compound interest means your money grows more over time. Amounts as small as £50 can make a massive difference if you start in your 20s and 30s. 

If you are yet to start, do not panic. The best time is now. Most UK employees are auto-enrolled in a workplace pension, which you and your employer pay in.

If you are self-employed, look into a private pension or a SIPP. Each amount you save now contributes to your plan for a comfortable retirement later.

Understand how much income you need for a comfortable retirement

It becomes much easier to save when you set goals and know what you are aiming for.

The suggestion is to aim for two-thirds of your current income in retirement.

This does, of course, depend on your lifestyle. Are you someone planning to travel? Will you be downsizing, or are you staying in your current home?

Do you plan to help your children financially? These factors will majorly impact your decision-making and the amount you need. 

Creating a rough budget for life after work is key if you want to plan for a comfortable retirement lifestyle. Include your essentials like housing, bills, food, transport and leisure.

Take away the income you will get from your state pension and any other pensions.

The amount you are left with is the potential shortfall; this is what you will need to cover with your savings. 

A comfortable retirement needs more than the state pension

Although the UK state pension gives you a helpful base, it will not cover everything. The full new state pension sits at £11,973 a year.

That’s roughly £230.25 per week. 35 qualifying years of NI contributions are necessary to receive the full amount. 

Check your state pension forecast online through the government website if you are unsure of what you will get.

You will likely need a personal or workplace pension on top of this to effectively plan for a comfortable retirement.

Plan for health and care costs in later retirement

When we age, we begin to face health issues and sometimes need extra care.

Although the NHS can help, it doesn’t cover everything, especially long-term care.

It is a good idea to set money aside for private health care, mobility aids, and care home fees, all important when you plan for a comfortable retirement.

You will have to fund your own care if your assets are over £23,250, as the NHS states. 

Could working longer help fund a comfortable retirement?

The state pension age currently sits at 66, set to rise to 67 in 2026. A lot of people are now choosing to work beyond this age.

Some people enjoy their work and don’t find it too taxing; for many, it is due to financial reasons.

Part-time work can help top up your income; this allows you to defer your pension, saving it for your later years.

It is also important to note that deferring your pension increases it. It will increase by 1% for every 9 years you defer. 

Live within your means to secure a comfortable retirement

Maintaining good money habits can lead to less stress later in life.

Ensure you reduce debt before retirement; your earning capacity now will likely be more than when you are retired.

Create an emergency savings pot; the suggestion is usually 3-6 months of essential costs.

You may also want to adjust your lifestyle. Downsizing your home is a common way retirees’ free up cash in retirement.

By cutting back on non-essentials temporarily, you can boost pension savings.

Ensure your money is working for you

Your work life is not the only time you need your savings to grow; this remains important in retirement.

Inflation slowly erodes your spending power; keeping a portion of your money invested is crucial.

Diversify by investing in stocks, bonds, and cash. As you get older, reduce risk, but try not to keep everything in cash. 

Drawdown pensions allow you to withdraw funds while keeping the rest invested.

It is essential to make sure your withdrawals are sustainable. Withdrawals of 4% annually will help preserve your pension in the long run. 

Get expert advice

For most, retirement planning will feel complex. You do not have to do it alone.

A regulated financial advisor will help you create a plan tailored to your goals, risk tolerance and retirement needs.

There are also free services such as MoneyHelper, Citizens Advice and Pension Wise.

As we live longer, planning for retirement is crucial and can take time and thought.

You do not need to be wealthy to enjoy a comfortable retirement. If you save early, plan for a comfortable retirement, and receive the right advice, you can build a solid future.

Let Regulated Advice match you with a financial advisor for expert advice.