Setting retirement goals 'key to financial planning'

Money
22 May 2015
Setting goals for retirement can make it more straightforward to plan effectively for later life.

Planning for the future is something that people will find they are always advised  to do - and never is this more important than at the point of retirement.  

This is because a pension pot will have to last for the rest of the saver's lifetime - and in order to ensure financial planning is as effective as possible, it can be a good idea to ensure clear goals are set.

It can be a lot easier to make the most of a budget if you have a reasonable idea of what kind of lifestyle you want to lead in later life. 

This has to be budgeted for carefully - and here are a few tips to offer an idea of how to get started. 

Outgoings against income

Drawing up a list of all outgoings can serve to paint a realistic picture of what your cost of living actually looks like. It also makes identifying any areas where you can make some simple cutbacks easy to address. 

For retirement planning, it is advisable to take into account any big expenses that are likely to be on the horizon. For instance, any additional day-to-day living expenses will need to be taken into account, such as extra costs from utilities if more time is likely to be spent in the home. 

Big-ticket items such as a new car or modifications to a house will also need to be thought of, as will potential care costs in later life. 

Future plans

Although financial discipline is crucial at this stage, this does not mean no fun can be had in retirement. Taking leisure time seriously is vital for a happy and fulfilling retirement. However, this will need to be budgeted for in order to avoid financial difficulties further down the line. 

Think carefully about what you actually want to do when you leave work for the last time. If you intend to spend some time travelling, this needs to be taken into account, as well as other considerations such as taking up new hobbies, decorating, gardening, or travelling around to see your family more. 

This still applies to those who do not see themselves making too many lifestyle changes. It is becoming more commonplace for people to go down to part-time working hours, rather than leaving their job completely. If this is the case then you'll also be able to take into account a higher level of income. 

Set goals

When these figures of future income and likely outgoings have been recorded in as much detail as possible, a series of retirement goals can then be identified. 

These could include anything from increasing contributions in the run-up to retirement, to thinking about reviewing investments regularly - or even relocating if desired. 

Part-time work can easily be incorporated into plans to generate additional finance - and retirement plans can be adjusted in line with what is realistic and affordable. 

How will these goals change?

The level of savings a person is able to access in retirement will obviously diminish over time. However, it is also important to bear in mind the possibility of changes to individual circumstances - such as the need for care.  

While external factors - such as changes to policy and regulation affecting pensions - cannot necessarily be accounted for, having a strong idea of likely income against outgoings puts the retiree in a much better position to manage any necessary changes and enjoy a happy retirement. 

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