What to do if your retirement funding is falling short
Look, it happens regularly… people realise that with their current retirement planning approach, they are going to fall short of achieving the lifestyle they want in retirement. This happens for a whole lot of reasons – not having a plan, starting to save too late, not saving enough or the wrong investment strategy.
The starting point has to be getting a clear and realistic picture of where you actually stand. We can help you here, by assisting you in,
- Identifying the lifestyle to want in retirement
- Putting a cost on that lifestyle – the fund you will need to achieve it
- Seeing if you are on course to achieve your targeted lifestyle with your current retirement funding plan (including all sources of income in retirement)
- Identifying any shortfall
- Coming up with a plan to address the shortfall.
Let’s assume you’ve done all of this, have identified a shortfall and want to do something about it. Here are a few options that you can consider,
Work longer
The state pension age will soon be out to age 68, some feel this will be extended further to age 70 in time as our changing demographics will cause the state pension to simply become unaffordable in years to come without such action. But we should also recognise that in general, we will all be healthier through our 60’s and 70’s than generations before us, and will be well able to continue working.
Many people will want to keep working, some may need to in order to further fund their retirement. So start thinking about how you might keep working longer than you originally intended, even on a part-time basis.
Save more
Yes, this is often easier said than done, but it’s an obvious way of improving your lifestyle in retirement. Do you really need that second holiday? Do you need to change the car every 4-5 years?
While we were all forced into the situation, one thing many people learned during the Covid-19 lockdown was that our spending patterns can be reduced. Foregoing some of life’s pleasures today is a sure-fire way to helping you to build a better lifestyle in retirement.
Lower your sights in retirement
Another action you can take is to revisit your desired lifestyle in retirement. Maybe you have been aiming for the dream lifestyle, which is truth is simply beyond your capacity to achieve. It’s really important to strike the right balance between building the future life you want, while also enjoying your life today! Neither should be done at the total expense of the other – it’s all about balance…
Review your investment approach
Handle this one with caution, this is where you need our advice! But reviewing your investment approach may be part of the solution. This would need to be very carefully considered, taking into account your investment timeframe both pre and post retirement and your attitude to risk among other factors. Any tweaking of your investment approach would need to make sense when considering your financial plan and all of your financial objectives. This is definitely one to consider… but with a lot of care.
Look for BIG savings
Have you considered downsizing your house in retirement? You may love your current home but living in it during retirement may prevent you from doing many other things you love. For many people, their family home is far and away their biggest asset, with a lot of wealth tied up in it.
Downsizing to a smaller home in the area may possibly be the answer to your financial challenge in retirement. Also if your home is fairly big and your family have flown the nest, do you still need the space? Maybe having a smaller garden to maintain will be a benefit too in your later years. Moving house may just unlock the retirement lifestyle that you really want.
While some of these suggestions might not appear to be too attractive, at least you have some options. Now is the time to consider them, as the longer you delay, the steeper the hill becomes. We’ll be delighted to chat through all of your options with you.