When and How Should I Start Retirement Planning?

Retirement planning is something that for some people can feel like something they need to think about when they are older. For others they may think that it is just too late. Some may think that they are struggling financially enough and they need to prioritise paying off loans before worrying about retiring. However, it is something that needs thought and you need to think about how you are going to plan things as well.

What age should I start?

We are often told that we should start planning or are retirement as soon as possible. However, when we first start work, when we are still a teenager, it is so hard to imagine what it might be like to be retired. If we get offered a work pension then it can be tempting to opt out and use the money to pay for day to day items. This is because we may have a low wage and lots of things to pay for. As we get older though, things can get even dearer as we take on our own household, perhaps have a family and even later we may have to care for our parents or pay for them to be in a care home. It can feel that there is never time to be able to afford to pay in. However, if you start young and just pay in a small amount, this will add up through all of your years of work. Then when you do retire it will have accumulated to a decent pot. If you wait until you are older, you will have to pay in more if you want the same size of pension pot or you will have a lower pension.

What should I do?

It is probably wise to start thinking about retirement right away. Think about how much money you think you will need in retirement and whether your government pension will be enough to provide you with the retirement that you want. If not, then you will need to think about how you will be able to put by enough money so that you can. There are pension calculators that you can use which will allow you to work out how much you will need to invest. You may, of course, decide to incest in a different way to a pension.

What if I have no pension fund?

If you are still young then there may be plenty of time to set up a pension fund. You might be able to do this through your work or set up a personal one. There are also alternatives to investing in a pension fund for retirement as well, which are worth looking in to. If it is too late and you have stopped working and have no pension fund, then things could be trickier. You might be able to pick up some work again so that you could start paying in. Otherwise it may be that you will have to rely on being looked after by the state or by your family. It is worth looking into your options just in case there is something that you can do.

How Can I Plan?

Planning your retirement can be tricky as you will not know how long you will live or what your state of health will be. However, you should be able to work out how much you will have financially. You can use the governments website to calculate how much pension you will be entitled to form the state and you should know how much pension you will get from other sources such as work pensions and personal pensions. Once you have this information you should be able to work out how much income you will have in retirement. Compare this to what you have now and consider how your expenses might change and you will be able to work out whether you have enough. If you feel that you will not have enough money then you will need to consider how you can get more. Many people would consider a pension and paying more into that but there are other possible investments that some people choose to use instead. It can be wise to do a lot of research and possibly even use a financial advisor to help you so that you make the right decision.

It can be pretty scary thinking about retirement. It can be a worry wondering how you will afford to pay in enough money or that you are getting close to retirement without having paid in much. However, ignoring the problem will not make it go away and the quicker you can take action the better. Even if you just start putting away a very small amount of money it will be better than doing nothing. It is worth trying to be positive and trying to improve your situation rather than worrying about how bad things could be. Even if you are very close to retirement, you could still make a difference if you really wanted to.

How Easy is it to Downsize?

If you are struggling for money, then you may mull through a number of options. Some people may borrow or work harder, reduce their spending or whatever, but there are some that might consider downsizing. This is something which is often suggested as a solution, particularly once families get smaller after children have left home. However, even though it is suggested lightly, it is not as easy as it may seem. It is worth considering what has to be done in order to achieve this.

Move to a smaller home

In order to downsize, you obviously have to move to a smaller home. Although in theory this is simple enough it means that you actually have to find somewhere smaller that you like and go through the hassle of moving. If you own your home, then you will need to sell yours first which could take some time. If you are renting, you may need to get together a deposit for the new rental place. It will take a lot longer to sell a home than move if you are renting, but there will still be the effort of searching for a new place. You will also have to organise all of the removals which some people do not like doing. You will have to decide whether you will pack things up and hire a van or whether you will get a company in to do it for you. Your decision could be influenced by how capable you are of doing the packing yourself or whether your health and strength means that you will need help with it.

Sell items to free up necessary space

If you are downsizing then you will probably need to get rid of some of the things that you own so that you can fit in your smaller property. Selling items will raise money which could help with the costs of moving. You may have to donate some things to charity and possibly even throw some things away. It can be hard to do this and some people really struggle with it. Others cherish the idea of being able to have  good clear out and get rid of things that they have been trying to get an excuse to get rid of for years.

Be less able to then entertain guests

Once you have a smaller property it will mean that there will be less room for guests. This could mean that you will be less able to have people stay over with you, but it could also mean that you will not be able to also have visitors over for meals. This may be more of a problem for some people than others, it will depend on how large a family you have and how often you see them. It may be that they will be able to stay in a hotel nearby and you may be able to eat out so that you do not have to have everyone in your home all at once.

Have less money invested in property

If you own your home then you will have money tied up in it. When you downsize you will release that money. Although it could be useful to have the money to help you out if you are in a tricky financial situation, it will mean that you will have less opportunity to have money gaining in value. When money is tied up in property it is usually gaining in value as the property normally gains value. Once the money is taken out then it does not do this. You may need to spend all of the money anyway, but if you do not, then you will be losing out on the increase in value of that money. It is therefore wise to consider whether you want to invest it elsewhere so that it can continue to gain in value. A secondary effect will also be that there will be less to inherit. Your children may be inheriting the home, but once it is smaller it means that they will be inheriting less. You will have to think about whether you need the money more than they will.

The practical side of downsizing, such as finding a new property, reducing the things you own and moving can be tricky but they do not last long. However, the effects of having a smaller home can eb longer lasting. Not being able to entertain so easily could be more of a problem if you like having lots of family and friends to visit. Not having so much to pass on to children could also be a concern to some but it depends on how much help your children need financially or in fact whether you have any children at all to pass things on to.