The amount of money you’ll need to enjoy a retirement free from financial constraints will vary depending on your circumstances and retirement plans.
There are various sources of advice that can guide you on the best ways to save, and the best ways to draw income from your saving pots in the future. But ultimately, you’ll only get it right by considering all the different variables for your unique position.
What is your current financial position?
You may have ambitious goals that will provide you with the retirement you have always dreamed of, but do you currently have the liquid assets to keep up with that plan? And, perhaps most importantly, is it a sustainable plan that can work with your shorter-term goals, so that you can maintain the style of living that you deserve before retirement?
What does your dream retirement look like?
For many, retirement can provide the freedom to enjoy travel, expensive home renovations and new hobbies. Consider what expenditures will be essential and how much you’d like to keep aside for luxury purchases and create a year-on-year retirement budget that you will then need to compare against your current financial position.
What is your life expectancy?
If you retire at 55 and then live until you are 104, you are going to need a much bigger pension pot than if you retire at 83 and die a year later. Of course, nobody can predict the future, but an estimate can be useful to help budget in a practical way. People are living longer. Also, consider the life expectancy of your spouse and whether you want to leave behind a legacy to your children/beneficiaries.
Where will your money come from?
Ideally, your retirement should not all rest on a single income. Look at all your different revenue streams and the expected income from those. Consider any final salary pensions, defined contribution pensions and state pensions, but also look at income from rental and other investments. It’s also important to consider how much you will receive from each source and what tax implications this will have. Can you be more tax-efficient by taking income in different ways?
What are the stipulations on your income?
For example, if you do have a final salary income, how will this affect your partner if you predecease them? Does the annual pension payment drop to 50%? Will that leave your spouse with enough money to maintain the life they want?
Although investments outside of pension wrappers can provide useful money streams in retirement, it is unlikely that you’ll want to take the same level of risk with your investments in retirement. Does this mean your investments will deplete at a faster rate if you are achieving a lower return? And will this affect how much money you drawdown from your investments?
4% Withdrawal Rate
This rule follows the thought process that if retirees withdraw 4% from the total value of their investment portfolio in the first year of retirement. And then each following year, allowing for increases in inflation. This should be sufficient as not to deplete funds. However, market conditions — namely, lower projected returns for stocks and bonds, don’t seem to be working in retirees’ favour. And given the recent increases in inflation, alongside market expectations, the 4% rule may no longer be feasible. According to a recent paper published by researchers at Morningstar. These days, the 4% rule should really be the 3.3% rule. So you might need more than you first thought.
Cashflow planning in retirement
Building your individual retirement cash flow plan involves assessing your current and forecasted wealth, along with your income and expenditure. Using assumed rates of investment growth, inflation and interest rates, to build a picture of your finances now and in the future. Cashflow planning is an excellent tool to help you plan sources and uses of cash in retirement.
A financial adviser can also help you to plan your taxes with cashflow models, in order to make your money go further. Helping to boost your retirement savings.
If you would like to understand more book a discovery call with me today.
The United Arab Emirates (UAE) has become a popular destination for expatriates seeking new opportunities and a vibrant lifestyle. However, when it comes to matters of succession and inheritance, ex-pats residing in the UAE need to be aware of the unique legal framework in place.
Published On: April 18, 2023|2.7 min read|
The Removal of the Lifetime Allowance Limit. What does it mean for my Pension?
In the Spring Budget of 2023, Chancellor of the Exchequer announced the removal of the Lifetime Allowance (LTA) for pension contributions. This decision has sparked a lot of controversy and debate, as it has significant implications for pension savers in the UK.
Published On: November 18, 2022|3.4 min read|
Have you exceeded the Lifetime Allowance?
Should you continue to make pension contributions?
With steady decreases in the value of the LTA over time. More and more individuals are finding themselves in excess of the lifetime allowance prior to their planned retirement.
Get our latest financial blogs and articles straight to you inbox.
In partnership with
The information in this material is intended for the recipient’s background information and use only. It is provided in good faith and without any warranty or, representation as to accuracy or completeness. Information and opinions presented in this material have been obtained or derived from sources believed by AES to be reliable and AES has reasonable grounds to believe that all factual information herein is true as at the date of issue. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorised reproduction or transmitting of this material is strictly prohibited. AES accepts no responsibility for loss arising from the use of the information contained herein.
‘AES’ refers to the AES Group’s separate but affiliated entities generally, rather than to one particular entity. These entities are AES Middle East Insurance Broker LLC registered with the UAE Ministry of Economy, United Arab Emirates, Licence no. 571368, and Commercial Registration no. 75162 and regulated by the UAE Central Bank license no. 189; AES Financial Services Limited, incorporated and registered in England and Wales with company number 06063185, authorised and regulated by the UK Financial Conduct Authority FRN: 464494; AES Financial Services (DIFC) Ltd, registered in the Dubai Financial Centre (DIFC) as a foreign company, license no.2128, and regulated by the Dubai Financial Services Authority (DFSA) Reference No F003476; AES International Limited, a private company incorporated and registered in the British Virgin Islands with company number 1839872; AES International Global Limited, a private company incorporated and registered in the British Virgin Islands with company number 1887885. Please visit our authorisations page for further information on regulation, redress and accessibility.
If you are outside the UK and we advise you or carry out other business, nearly all the rules, regulations and arrangements made under the UK regulatory regime (including the rules made by the FCA and the dispute resolution process provided by the UK Financial Ombudsman Service) will not apply to most aspects of the service you receive, such advice or business being provided from outside the UK. You should therefore clearly understand such rights and protection as are afforded in the jurisdiction where you receive advice. Local law, regulation and redress processes will apply in almost all cases, and will be different from that of the UK.
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investment, when redeemed, may be worth more or less than the capital invested. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful. For further information, please click here.