• Editor

Check your retirement picture with these eight easy steps

Preparing for retirement or any big life event means you can have more confidence in your chance of financial success. Gathering your information and going through several steps will help you build a full picture of what to expect in retirement.

Being prepared and proactive is a good idea whether you are in the first 10 years of your working life, or your last 10. In fact, the further you are away from retirement the more options you have.

Many of us find it difficult to imagine our future selves and what our needs will be. Lacking a connection with our future selves, and faced with the difficult day-to-day challenges of earning just enough to live on, means that preparing for retirement is placed on hold – often until it’s too late. If this sounds like you, you’re not alone. But there are steps you can take to change this picture.

Those who retire without enough money place a heavy financial burden on other family members and loved ones.

Do you want to plan for your retirement, understand your pension options and get ready to make decisions that are right for you? Alexander Forbes has eight steps for you to take to build your personal retirement picture:

Step 1: Decide to be prepared

Become aware of the fact that you are on a journey to a time when you will have to live on your savings, no matter your age. The purpose of saving for the future is so that you can buy yourself a pension one day when you can no longer work. Taking the first step to build your future financial picture starts with a decision to be prepared.

Step 2: Save more

Look at how much you’re currently earning, and what portion you’re saving for retirement. You’ll find this information easily on your payslip. Look for places in your budget where you can save more. According to Alexander Forbes research, you need to save at least 17% of your salary for 40 years to achieve a pension amount that is similar to your salary just before you retire from your employer.

Step 3: Estimate your expected pension

You can find out what pension you’re on track for based on:

  • your age

  • the amount you’ve already saved

  • the amount you’re saving each month

People are always keen to know this amount. Sometimes it can be a bit of a shock if it’s much lower than the amount you’re currently earning.

Step 4: Look at your monthly expenses

Monthly expenses are often linked to how much you are currently earning. They are likely to be more than the monthly pension you can expect. Take some time to think about how you might reduce your expenses after you retire if it’s only a few years away. People with more time should look at their current expenses to see where they can reduce or delay expenses to save more. Remember to put some money aside for emergencies or unexpected events. Having savings when things go wrong helps to reduce stress and keep you on track to achieve your goals.

Step 5: Assess if you are on track

You’ve compared your expected monthly pension in retirement to the expenses you think you’ll have after you retire in the previous step. Now you’ll be able to assess if you are on track to receive a pension you can live on. If so, you can keep going.

If you’re not on track, look at ways to improve your future picture by:

  • decreasing your expenses

  • thinking about working longer

  • finding other sources of income

  • saving more

This is a critical part of retirement planning and gives you your best chance of reaching your goals. The earlier you start, the more ways you have available to you to improve your future picture.

Knowing where you stand and what you have to work with as you get ready to retire will give you the best chance of reaching your goals.

Step 6: Find out about different pensions

If you’re closer to retirement, you can start exploring different types of pensions and weigh up their advantages and disadvantages.