Are you underestimating the cost of retirement living?
Schroders Global Investor Study 2018 has revealed a significant gap between people’s expectations and the financial realities of a life in retirement.
Retirees are receiving a lower income in retirement than people approaching retirement currently expect. In the UK retirees are, on average, receiving 53% of their final salary annually. In the run up to retirement, people aged 55 and over expect to need 66% of their final salary to live comfortably. The lower than anticipated income can come as a shock.
Bridging the income gap
Perhaps an indication that their final income may not stretch far enough, retirees in the UK are continuing to invest significantly, allocating 21% of their entire retirement savings to investments. In contrast, those yet to retire only anticipate investing 7% of their retirement savings.
The danger of not allocating sufficient money to basic living costs is impounded by increasing inflation. There’s no magic wand for people, especially if you are already retired.
Steps you can take
For me, the key to funding your retirement successfully is proper retirement planning. This means building a financial plan, also known as a cash flow, that projects your income, expenditure, assets and liabilities for your lifetime and illustrates how to structure your assets to fund your desired retirement.
Your financial plan empowers you to make smart choices about your money and to balance your living costs with any plans to take that holiday of a lifetime, plan for care or leave an inheritance.
It’s never too late to create a plan for your future. After all, your retirement could last an awfully long time.
Contributed by Justin King, Chartered Financial Planner at award-winning retirement planners MFP Wealth Management
Articles are included by FCRA in good faith and do not indicate a recommendation for products or services.
 Any types of investment intended to be used to generate a retirement income, e.g. company pension scheme, state pension scheme, personal pension, other savings and investments, releasing capital/equity from home, money/allowance from relative, inheritance.