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How to achieve the life you want in retirement
Retirement may seem like a long way off, but if you want to be comfortable in your old age, you need to start planning now.
by Michelle McGagh on Mar 01, 2012 at 11:48
The savings shortfall has left today's average pensioner needing £140 a week of extra income in order to feel comfortable. But those saving for retirement now can avoid a similar fate by following some easy steps and visualising the life they would like to lead.
According to a report from annuity provider MGM Advantage the average retired person needs an extra £7,300 each year in order to feel financially comfortable. That's a total of £86 billion for all pensioners in the UK.
It also states that retirees fall into one of six categories:
Thriving: Has both the money and good health to really enjoy retirement, and to do the things they have always dreamed of.
Aspiring: Dreams of a better life in retirement, but may not be able to achieve it as money hasn’t performed as well as hoped, or health problems may cut down their ability to travel and enjoy hobbies.
Comfortable: Enjoys good health, and has enough money to maintain the same lifestyle throughout retirement, as well as treat themselves and their family occasionally.
Careful: Independent, self-sufficient, and wants to keep the same lifestyle throughout retirement. But the modest pension, investment and equity they have built up over their working lifetime is making this tough.
Squeezed: Income will be less in retirement because of low savings, and they may have to continue working if their health allows.
Restricted: Mainly dependent upon the state and possibly family for financial support, they have to budget very carefully and cannot plan ahead.
Currently most pensioners fall into the comfortable category, with 29% of those surveyed by MGM Advantage placing themselves in that bracket. A total of 15% described themselves as thriving, another 15% as aspiring, 13% as careful, 20% as squeezed and 8% said they were restricted.
The big squeeze
It is expected that, as generous defined benefit pension schemes come to an end, more people will find they are moved down the scale from comfortable to careful, squeezed or even restricted.
‘These groups… are not static. We do not expect the same split of types in the UK Retirement Nation in, say 10 or 20 years’ time… we expect more people to fall into the categories with less retirement income, where budgeting is more of a concern,’ said the report.
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