Have you saved enough for retirement?
Planning early for your retirement could pay enormous dividends, says our financial expert.
It's strange that there’s a reluctance to accommodate a comprehensive form of financial literacy within our education system's curriculum. And the longer-term repercussions of this omission could prove serious.
There are literally millions of baby boomers across the globe who are careering towards retirement with very little idea of what they want from it or how they’ll get by without a regular salary.
Yet as dramatic improvements in medicine and social conditions increase life expectancy, there’s an overwhelming need for everyone to consider what type of life they want and what they’re going to do to achieve it.
I would strongly recommend a book called The Number: What Do You Need for the Rest of Your Life, and What Will It Cost? by Lee Eisenberg, which features a pin-sharp analysis of retirement planning.
Eisenberg starts by considering whether he and his wife have achieved a sufficient Number – i.e. enough money to live on when they retire. "How much is enough? And if we didn’t have enough, what compromises and sacrifices were we prepared to make?”
Their aims were remarkably similar to most retirees: a roof over their heads, children’s education costs covered, a sum set aside for possible future healthcare, the opportunity to travel and enjoy their leisure time together.
Yet when Eisenberg began talking to people of a similar age to himself (mid-fifties), he discovered that while most acknowledged that they were coming to a fork in the road, very few actually had a plan. Nor were they speaking to professionals capable of guiding them to a contented retirement.
The Number was published in 2006, although little appears to have changed in the interim. One pension provider noted recently that, after examining its members’ attitudes to professional guidance as they headed towards retirement, “only 20% were taking advice,” prompting the firm to expand its educational support.
It seems odd that as we approach our fifties and sixties, education could be back on the agenda, though why shouldn't it? Millions of greying adults learn a new language or how to cook, so why shouldn't we educate ourselves in respect of money?
An increasing number of people recognise that, at the very least, they require guidance to effectively highlight their options and the level of retirement income they can expect. Nevertheless, this is a far from universal attitude.
For those doubtful of the merits of retirement advice, Eisenberg poses a question many would admit to having mulled over at some stage: “What are the chances that you’ll live out your days in comfort?”
He takes this a stage further, laying a brutal, twenty-first century truth on the line: “Are you ready for the good news and the bad news that’s around the bend? That you’ll live longer than you ever figured, which is the good news. And that you’ll live longer than you ever figured, which is also the bad news.”
Answering these questions properly requires a willingness on the part of those approaching retirement to accept that they must educate themselves about money.
Clearly, millions already have: research shows that most people want to keep working, at least on a part-time basis, until they’re into their seventies – a tacit acknowledgement that they’re yet to achieve their ‘Number’.
In many respects, pension planning is about ensuring that we understand how to make the most of our respective pension pots and the impact longevity will have on the quantity of money and other assets they have within them.
In an age where personal debt is at its highest-ever level, accepting the need to be educated regarding pensions and retirement – whatever your age – will undoubtedly help you achieve your ‘Number’.
For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.
This column is for general information only and cannot be relied on as financial advice for individuals. Consult your professional adviser.