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10 Year Retirement Plan

Are you worried you'll be short of money when you retire? The good news is that ypucan still do something about it - even if you're in your 50s

BY ROB GRIFFIN

IF YOU ARE financially unprepared for retirement and you're in your 50s, the good news is you're not alone. The bad news, however, is that you're fast running out of time if you want a comfortable retirement. Despite the vast majority of people in this age bracket accepting a plan is essential, one in five still hasn't put one in place, according to a depressing study published by Barclays Stockbrokers.

Such findings make grim reading, warns Catherine Penney, vice president at Barclays Stockbrokers, who is worried about the number of people who are approaching retirement without enough money to look after themselves.

"With so many people facing much more immediate demands on their money, such as mortgage repayments or paying for university, it is only natural that these later life concerns can often fall by the wayside," she says.

Around a third of our lives can be spent in retirement - and those years should, in theory, be among our most enjoyable and relaxing.

But the gradual demise of the final salary scheme, where workers knew they could rely on a steady income for the rest of their lives after giving up work, along with the meagre state pension, means you're unlikely to live a life of carefree abandon.

In fact, without adequate resources you won't be able to sustain basic living standards, let alone have enough for luxury foreign holidays, enjoying new hobbies or giving your children a helping hand.

The new state pension pays up to £155.65 a week, but that's only £8,093.80 a year. Patrick Connolly, a certified financial planner at Chase de Vere, says: “If you've done little retirement planning, then you may struggle to achieve the standard of living you want in later life. You'll need to make some compromises in terms of having less income in retirement or working for longer and retiring later."

Even those with company and private pensions may need to find ways to give their retirement pot a much-needed boost when they are in the countdown to giving up work and taking things a bit easier.


So what should you do? Have you left it too late to start a pension? Do the new regulatory changes make it easier or harder to make up for lost time? Are there other savings products that have a better chance of delivering the results?

1. ASSESS YOUR SITUATION
First take stock of what you have in place, including savings, investments and any company or private pensions. Bill Marshall, a chartered financial planner at Lamb & Associates, says: “If you run a business, then look to see if it's something you can either sell or turn into a franchise operation. Also consider your properties - you might be better off selling up and renting."

Next, you need to forecast your income needs in retirement. Independent financial advisers use lifestyle questionnaires that take into account everything you are likely to spend your money on in the future. They use these to estimate how much people need to have saved by retirement.

"You need to go as far as what car you have and how often it's replaced," says Mr Marshall. “Drilling down this far will show how your spending will change when you've got more free time and enable you to project it forward."

Have a look at the pension calculator on the Money Advice Service website (Moneyadviceservice.org. uk/en/tools/pension-calculator) and request a State Pension Forecast to see how much you will get from the government.

2. CONSIDER YOUR INVESTMENT VEHICLES
Once you know how much you'll need in later life, it's time to consider what investment vehicles will be most suitable to build a fund that will provide this income. Moneywise recommends the CF Woodford Equity Income and Jupiter High Income funds. For more fund ideas. Jason Witcombe, director of Evolve Financial Planning, says: “People automatically think of pensions, but a successful retirement just means having enough money to pay the bills. “They may have spent time paying down the mortgage which is just as admirable as paying into a pension or individual savings account (Isa)."

One crucial element is keeping your outgoings to a workable minimum. For example, you'll have essentials such as council tax, while other bills, including eating out and TV subscriptions, will be discretionary.

"Unless you can create a surplus of income over expenditure and put that to use by saving and investing, you'll struggle to build up enough money to retire,” he adds. “For those on the housing ladder, properties will probably solve the problem, however unappealing it may be to downsize from a home you've lived in for a long time.”

3. THINK ABOUT PENSIONS
If you haven't started retirement planning by your mid-50s, there's no quick fix - but there are some practical steps you can take to improve your position, according to Tom McPhail, head of pensions research at Hargreaves Lansdown.

"You can join a workplace pension and get the benefit of your employer's contribution," he explains. “It's free money, so it makes a lot of sense - and under the new pensions freedoms you can also take it out when you reach the age of 55 anyway."

As far as private pensions are concerned, you'll need to decide how much involvement you want in the day-to-day running of your investments. If you're fairly disengaged and prefer a ready-made investment portfolio, then maybe consider the 'default option' in a stakeholder pension. These low-cost (typically with no more than 1% annual charge), no-'frills pensions have been around since 2001 and are aimed at those on low and middle incomes, for whom standard pensions were too expensive or unsuitable. Aviva's stakeholder pension was a clear winner' in the Moneywise Pension Awards 2015, thanks to a good range of funds and low costs. You can start it with just £20.

If you're in your 50s, then you're probably still looking at an investment horizon of at least a decade before you retire. It's still worth investing in the stock market and trying to make your money grow than parking it in cash where you're lucky to get one or 2% interest.

You can then make the most of the new pensions freedoms that allow you to take the money out as you wish. HMRC figures reveal that more than 230,000 have accessed £4.3 billion flexibly from their pension pots since April 2015.

However, Richard Parkin, head of pensions at Fidelity International, warns: “Choices made at retirement cannot be easily undone and people will benefit from seeking expert help even if only looking to take part of their savings as cash."


4. BOOST YOUR RETIREMENT POT
As well as savings, investments and pensions, there are other ways to bolster your provision for later life. The first is to consider equity release options, which enable you to access the cash tied up in your own home.

However, Mr McPhail warns against rushing into such a plan too early in life. “It can work well if you're in vour 70s, but doing it in your 50s isn't such a good idea because you won't be offered a very attractive deal from providers,” he says.

Of course, you can always consider working longer - or even setting up your own part-time business to earn extra money. It all depends on your individual circumstances and how much you will need for a comfortable retirement.

DON'T DELAY
So where does that leave the over-50s? Even though it won't be easy to make up for lost time, the fact is that putting something away now is better than nothing at all.

“There's no sugar for this pill and it won't get easier if you ignore it,” says Mr McPhail. “There's a lot to be said about grasping the nettle and exploring your options. Once you've overcome that hurdle, you'll know where you stand and what can be done about it.”

Source Moneywise


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