Avoiding Retirement Regret
If someone was to make a film about your retirement, what would it be called?
If someone was to make a film about your retirement, what would it be called?
‘Invest side story’? What about ‘Raiders of the lost pension’, coming to a cinema near you?
Or maybe it’s the next psychological horror blockbuster: ‘The retirement that never was’.
Nobody would want that. But for 2 in 5 UK retirees, retirement is filled with regret – if not horror-worthy jump scares. 1
Whether it stems from having not increased pension contributions whilst in work, not making lifestyle adjustments to help facilitate the retirement they’d dreamed of, or retiring too early – or even too late, when nearly half of UK pensioners harbour regrets about their retirement, you know something must change.
So how could you protect yourself from regrets in the future?
Save, save, save.
Saving as much as you can afford, while you can, is more or less the long and the short of it. Even if it is the absolute minimum, at least you’re saving. Almost one in five (17%) retirees said they would have increased their pension savings whilst working. 2
Hindsight is, as they say, a wonderful thing, but having retirement regret is not.
At Pension Awareness, we like to use a little rule of thumb that acts as a good guide to saving for retirement. If you can aim to save half of your age as a percentage of your salary towards retirement, then you’re on solid ground and can pave the way for a regret-less retirement.
So, let’s say you’re 42. Half your age is 21. Now, banish the sobering thoughts of youth from your mind. Then, take 21 and turn it into 21%. That’s how much your pension contribution would be if you were ‘saving half your age’.
It… sounds like a lot. Especially considering it’s a percentage of your salary.
But remember, in the UK, your employer contributes to your Defined Contribution pension, too.
So, let’s imagine your employer promises to pay in 7% (legally they only have to pay in 3% but some will pay more) out of their own pocket to your pension. Your share is now suddenly brought down to 14%.
If your employer offers matching pension contributions – then you’re in luck – a 10.5% contribution from you would meet the ‘half your age’ rule.
But – fundamentally and often-forgot – if you started your pension at the age of 22, and not 42, you would need to save 11%. For the rest of your working life. If you can, you should aim to save half of the age at which you opened the pension. Because starting early pays.
And, if you start saving earlier, you’ll be considering retirement for longer, giving you more time to picture your future and realise what you could do to prevent those niggling regrets later down the line.
MoneyHelper even have a handy budget planner that could help to work out where you could begin finding wiggle room for increasing your contributions.
Which brings us to…
1 Two in five UK retirees have retirement regrets | Canada Life UK
2 Two in five UK retirees have retirement regrets | Canada Life UK
Plan the picture
So what was the title of the film inspired by your retirement? Picture that picture. In fact, research from the brains behind the Retirement Living Standards found that people who pictured their retirement tend to save more mindfully towards it. 3 It makes sense really: knowing what you want helps you to get it.
Did you know that nearly one in ten (8%) retirees regret leaving work when they did, wishing they’d retired later in life? 4
So stave off regrets with a holistic retirement plan that considers both the financial and emotional sides of your life. Because you’re ‘gonna need to fund the fun.
It starts by assessing your situation. How much have you got saved already? Even taking a total across various pots can help to focus your plan. It can also help you to realise how much money you might need in retirement, and how far off that goal you might be now. The Retirement Living Standards have a good guideline based on the cost of living, and split their costings into three lifestyle standards: minimum, moderate, and comfortable. Check out the standards here and see what you could afford.
Now, where is the money you’ve saved? Are there even some old pensions unaccounted for? You can track down old and forgotten pensions by rifling through the old papers that you’ve (inevitably) stashed in a shoebox, or the out-of-reach drawer, or – well, only you know where. Old statements with the pension provider’s name, a P60 with an old employer on… anything with a contact detail or account number with which your hunt can begin. With which you can become a ‘raider of the lost pension’…
And don’t worry. If you’re a diligent recycler, having parted ways with your old pension papers, then hope is not lost. The Pension Tracing Service – a government-backed service – can point you in the right direction.
But there’s another layer to your retirement picture to think about as well. What will you actually do in retirement? This might be one of the more under rated aspects of retirement planning, but it’s just as important as the others in preventing regret down the line.
Realising what brings you joy in life now could help you to decide what kind of retirement lifestyle you’ll want to have in the future. Whether you love going out with friends, embarking on adventures around the world, or finding time to pursue hobbies, you’ll need to be able to fund it.
So knowing exactly what it is that makes you tick can really help you to plan your retirement and shore up your defences against future regrets.
Because, as we said, when you know what you want, it’s easier to get.
For more about planning retirement, check out our checklist to the ultimate retirement here.
Or, if you’ve got five minutes to review your finances, try out MoneyHelper’s Midlife MOT tool to get a personalised report on improvements you could make to your financial forecast.
3 You Make Better Decisions If You “See” Your Senior Self (hbr.org)