Can you afford the cost of retirement?

10 May 2016
Perhaps you are feeling like it’s time to leave the workplace. Maybe you just work in an unhealthy environment, or perhaps retirement is in on the horizon based on your company’s policies. While this can be a daunting time, the challenge is to see it as an opportunity to indulge in all the incredible things that you have always wanted to do.

You want to ensure that you have enough savings to live the lifestyle you desire in retirement. So, the poignant question remains, can you afford the cost of retirement? Here’s a little ‘how to’ guide to determine whether you are ready to retire, or whether you should still put some plans in place for a comfortable and stress-free retirement.


Understand where you are at financially

Retirement is not something that should be rushed into or that just happens overnight. You need to think about it carefully and plan for it. You need to look at your finances, which will put you in a better position to gauge if you can afford the cost of retirement, and how much harder you may still need to work in order to do so. If your children are financially independent, you have paid off your house and any other debts that you might have had and you have multiple sources of income, then there’s a good chance you are ready for retirement.


But there are other factors to consider too, such as if you would get any government benefits and what your pension and investments would amount to. If you don’t need to use your pension pot yet, consider leaving it alone until you genuinely do need it, as the nest egg there will have time to grow further. Keep in mind that when it comes to a pension pot, according to this site, “You can continue to work while taking money from your pension pot. Just remember that besides the 25% lump sum you get tax-free, you have to pay tax on your pension as well as any other income that you receive.” And in terms of your state pension, if you don’t need it right now, consider deferring it for later use too.


Calculate a retirement budget

The cost of retirement will vary from person to person and will depend hugely on the lifestyle that you want. One thing is certain, however, the way in which you live and spend money will change and, of course, watching what you spend is imperative. So the first port of call when deducing whether you can afford the cost of retirement or not is to create a monthly budget.


But where do you start? Well for a comfortable lifestyle, it’s recommended that you have 60% of what you were earning before you retired. This would work out to approximately £11,454 per year for a retired couple and about £3,000 less for a single retiree, according to this site — use these figures as a guideline only.


If you need a little help you can use the retirement calculators on this site.


Test run a retirement budget

Once you have established where you are financially and have created a budget, a surefire way to see if you are genuinely ready for retirement is to do a test run on a retirement budget. We suggest trying it for approximately six months to really get a sense of how you will fare.

While this exercise may seem daunting, it’s hugely valuable so that the power is in your hands to determine what your next steps are.


What now?

So you have calculated and tested a budget, and are still not confident that you are quite ready or able to afford the cost of retirement. Don’t worry! It’s the case for many people the world over and you are certainly not alone. You can either decide to put off your retirement and work just that little bit harder now that you know the goals you need to reach, or you could try any of these when you actually reach retirement:


  • Cut down on some of the luxuries

For some, it may be unrealistic that you will be able to live exactly the same lifestyle as before retirement. Consider re-looking your budget and cutting down on some of the luxuries that you could honestly do without. With things such as Netflix, is it really worth spending all that money on satellite television? Sit down with your partner and discuss which the expenses can be minimised.


  • Get a part-time job

Just because you are retiring from the 9 - 5 doesn’t mean that you have to stop working altogether. There are ample ways to make money while in retirement. You can get a part-time job that appeals to you, such as working in a book shop or at a wine shop, you can start your own venture, you can sell some things you no longer use, you can teach, tutor or consult — the options are virtually endless. And if it’s not actually about the money at all but you just want to keep busy, why not volunteer for a cause you believe in.


  • Diversify your investment portfolio

If you are not entirely confident that you are ready for retirement, and still have a couple of years before you get there, why not spend a little money now, to diversify your investment portfolio. One of the best ways to do this is to buy a property in an incredible location and rent it out for some extra income in retirement — and if you get an agent to do all the nitty gritty, it could even be considered passive income and later down the line you could use it as your retirement  residence. After all, as the famous property investor and philanthropist Louis Glickman once said: “The best investment on earth is earth”.

If you are looking for an incredible property in the most unbelievable location, where you are bound to find tenants year round, then look no further than property in Calpe. Contact us for more information and to view our extensive portfolio of Calpe property for sale where you are sure to find an incredible investment property. Not only that, but our in-house tenanting service will make sure that you make the most of your investment property!

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