Retirement can feel impossibly far away when you’re dealing with today’s mortgage payment, childcare bill or weekly food shop. When there are so many immediate demands on your money, putting some of it aside for a version of yourself several decades from now isn’t always an obvious priority.
But retirement planning becomes much easier when time is on your side.
You don’t need to know exactly when you’ll retire, where you’ll live or how you’ll spend every day. What matters is gradually building the financial resources that could give you choices later.
At Metropolitan Mum, we make retirement planning easier to understand, from workplace pensions and contributions to working out how much you might eventually need.
Start With the Pension You Already Have
If you’re employed, there’s a good chance you’re already paying into a workplace pension.
But knowing that a pension deduction appears on your payslip isn’t the same as understanding what you have.
Take some time to find out:
- How much you’re contributing
- How much your employer contributes
- Where the pension is invested
- What fees you’re paying
- What your current pension balance is
- Whether your employer will contribute more if you do
- What retirement projections your provider gives you
Small differences in contributions can become significant when they’re compounded over many years.
If your employer offers contribution matching above the standard amount, understand how the scheme works before deciding how much to contribute.
Understand Why Starting Early Matters
When it comes to retirement investing, time can be extraordinarily valuable.
Money invested in your twenties or thirties potentially has decades to grow. Investment returns can generate further returns, creating the compounding effect that makes long-term investing so powerful.
Starting later doesn’t mean you’ve missed your opportunity. It simply means you may need to save more each month to work towards the same goal.
If retirement feels too distant to motivate you, don’t focus on building the entire amount today.
Focus on establishing the habit.
Regular contributions made automatically through a pension can quietly build in the background while you concentrate on the financial priorities directly in front of you.
Find Your Old Pensions
Changing jobs can leave a trail of pension pots behind you.
It’s surprisingly easy to lose track of them, particularly if you’ve moved house, changed email addresses or haven’t heard from a pension provider for years.
Make a list of your previous employers and check whether you had a workplace pension with each one.
Once you’ve located your pensions, keep their details somewhere secure.
You may decide to consolidate old pensions, but don’t automatically transfer them simply for convenience. Some schemes can contain valuable guarantees, benefits or different charging structures that could be lost after a transfer.
Understand what you’re giving up as well as what you might gain.
Work Out What Retirement Might Cost
Nobody can tell you exactly how much money you’ll need decades from now.
You can, however, start estimating.
Think about what your spending might look like once you’ve stopped working. Some costs may disappear or reduce, particularly commuting expenses and potentially your mortgage. Others, such as travel or hobbies, could increase.
Consider expenses including:
- Housing
- Energy and household bills
- Food
- Transport
- Holidays and travel
- Hobbies and entertainment
- Insurance
- Supporting family
- Healthcare and care costs
Then think about where your retirement income might come from.
That could include workplace and private pensions, the State Pension, investments, savings or other assets.
The difference between expected spending and expected income gives you a much clearer idea of what you’re working towards.
Don’t Rely Entirely on the State Pension
The State Pension can form an important part of retirement income, but it shouldn’t necessarily be your entire plan.
Your eventual entitlement will depend on the rules in place and your National Insurance record, among other factors.
You can check your State Pension forecast and National Insurance record through official government services.
Doing this periodically can help identify gaps or unexpected issues while there’s still time to investigate them.
Remember that pension rules, State Pension ages and payment amounts can change. Retirement planning that spans several decades needs to allow for that uncertainty.
Don’t Let Career Breaks Disappear From the Plan
Taking time away from paid employment to raise children or reducing your working hours can affect retirement savings.
The impact isn’t always obvious because the financial consequences might not be felt until decades later.
If one partner takes a significant career break while the other continues working, consider retirement planning as part of the wider household financial conversation.
Check how the break affects workplace pension contributions and your National Insurance record. Depending on your circumstances, certain credits may help protect your State Pension entitlement.
Returning to work can also be a useful time to review pension contributions rather than automatically continuing at the minimum level.
Increase Contributions When You Can
Finding additional money for retirement isn’t always realistic, particularly during expensive stages of family life.
That doesn’t mean your current contribution has to remain unchanged forever.
A pay rise, promotion or reduction in childcare costs can create an opportunity to increase pension saving without dramatically changing your existing lifestyle.
You could consider increasing contributions whenever:
- Your salary rises
- A major debt is cleared
- Childcare costs fall
- Your mortgage payment decreases
- You receive a bonus
- Your household income increases
Even directing part of the extra money towards retirement can make a difference over time.
Remember That Pensions Aren’t Just Savings Accounts
A pension is a long-term investment account with specific tax rules and restrictions.
Money inside a pension will typically be invested, which means its value can rise and fall. Depending on the pension, you may have some choice over how the money is invested.
Take a look rather than assuming the default option is automatically right for you.
Consider the level of risk, diversification, fees and how the investment strategy changes as you approach retirement.
You don’t need to monitor your pension every week. But something designed to fund several decades of your future deserves an occasional review.
Give Your Future Self More Choices
Retirement planning isn’t simply about reaching a particular age with a particular amount of money.
It’s about options.
A stronger financial position might allow you to retire earlier, reduce your working hours, travel more, help your children or simply stop worrying about whether your income will cover your expenses.
You don’t need to solve retirement in one afternoon.
Understand what you already have. Check your contributions. Find forgotten pensions, estimate what you might need and review your progress periodically.
Then keep going.
The decisions you make today might seem relatively small, but given enough time, they can have a substantial effect on the choices available to you decades from now.