The change in retirement has been pronounced over the last 30 years. Gone are the days of retiring on a specific date with a guaranteed final salary pension that would pay for next 10 -15 years. All of the investment risk for delivering the pension income sat with the pension trustees, so many individuals did not need to plan for retirement as such.

Now, retirement is a gradual process from full-time working to semi-retirement to full retirement. The lucky few still have some form of guaranteed defined benefit pension, with most retirees having a money-purchase pension, if they have saved at all. Retirement can now be 20-25 years long and has its own stages, with many retirees being more active in the early years, then spending less in mid to late retirement, with the prospect of paying for care in late retirement increasing their spending.

On the plus side, there is now more flexibility than ever before about how and when you take your pension. The downside is that the onus for planning for retirement and the investment risk has shifted to the individual.

So how do you plan for retirement?

I always recommend sitting down with a qualified financial planner to discuss your requirements fully. They will have helped hundreds of people plan for retirement, so they will think of things that you wouldn’t necessarily consider.

However, there are some basic things that can be done to make a start.

  1. “Start with the end in mind”. This famous phrase from Steven Covey’s book perfectly sums up where to start with retirement planning. Most of the clients that I have worked with who have achieved the retirement that they wanted had some idea of what they wanted whilst they were working. So consider:
    • When would you like to retire?
    • What would you like to do in retirement?
    • Will your spending be same throughout retirement or will it change?
  2. Work out how income you will need. I generally avoid broad brush rules such as achieving 2/3rds working income and focus on specific numbers that we know. Work out what you currently spend your income on. This will be a mixture of things such as mortgage or rent, utility bills, food, insurances etc.
  3. From this list, remove spending that will stop when you retire, such as mortgage payments (which will hopefully be paid off), life insurance designed to repay the mortgage, work related expenses etc.
  4. Add on the cost of things that you would like to do in retirement that you do not currently do, such as additional holidays, golf membership etc. This will give you an annual income target in today’s terms.

Of course, there may be more things to consider depending on an individuals situation and requirements, but the above four steps outline the basis of calculating your target income which is one of the first steps in a retirement plan.

If you would like to speak to a member of WBW Chartered Financial Planners about a retirement plan or any other financial planning related queries that you may have, then you can arrange a free telephone consultation for this week only as part of CISI’s Financial Planning Week 2019. To arrange a free consultation, please call 01626 202340 or email