Jumpstart Your Future: A Beginner’s Finance Guide

DREAM BIG, PLAN EARLY

Whether you’re coming up to retirement or it’s still decades away, it’s never too early to get to grips with your pension. According to a 2023 Gallup poll, only 43% of non-retired young adults expect to be financially comfortable in retirement – but this doesn’t have to be the case. In today’s article, we’re sharing actionable steps which you can take to have more of a handle on what kind of income you can expect, and how you can boost it in the coming years too. 

1. Start by identifying your goals

You could begin your planning journey by envisioning what your ideal future looks like. Consider your aspirations, whether it’s spending more time with family, travelling, or pursuing hobbies. Determining your desired lifestyle is an important factor in estimating how much you’ll need to be financially secure. Setting clear and achievable goals will form the basis of your financial plan, so that your financial wellbeing can be supported moving forwards and you can plan for a comfortable future.

2. Work out how much income you might need

For the majority of us, we’ll need to get used to a different pattern of income and spending when we retire. To prepare yourself for these changes, and to help you plan ahead, it’s a good idea to make a budget; it can help to break down your potential future spending into two categories:

• Essential spending – this is money you need to cover your basic living costs, such as heating and eating. This could include rent or mortgage costs, utility bills, groceries and car or transport costs.
• Non-essential or ‘discretionary’ spending – this is money for the things you like to do which could help to enrich your retirement too. For example, budget for holidays, gym memberships, days out, meals with friends or one-off experiences.

Don’t forget, HealthNav’s Budget Planner makes this step nice and easy! By having a good idea of your spending needs in later life, you can work backwards from there to see how much you may need to save or to add to your pension pot, as well as how long it will take to reach your income goals.

3. What is your future income likely to be?

The next step is to work out how much you’re likely to have later in life, based on your current income and any pensions you may have. There are a few areas to explore here:

1. Getting a State Pension statement: This will give you an estimate of how much State Pension you’ll receive, as well as when you may be able to retire. This is based on your National Insurance contributions so far. You can also use the calculator on the government website to predict how much you’d receive and when, based on what you’re currently contributing: https://www.gov.uk/plan-for-retirement
2. Finding out how much you have in your defined contribution pension pot. You should be sent a statement annually showing how much is in your pot, but you can also ask your provider for information on your retirement options.
3. Adding up the savings and investments you could use for your retirement. A pension is a good way to save for your future. But you might also have other savings or investments you could use to boost your income later in life.
4. Tracing any lost pensions. If you’ve lost track of any old pensions, there’s a free service to help you track them down. Find out more via the government’s pension tracing service here: https://www.gov.uk/find-pension-contact-details

If this is feeling overwhelming already, don’t worry – help is available! Our financial wellbeing partners Morrinson Wealth Wellbeing can support you with one to one consultations, or host a retirement planning seminar for your team. Get in touch with the zeno team to find out more.

4. Do your expectations and reality match up?

Reflecting on steps 2 and 3, does this seem realistic? If you won’t reach your desired future income until you’re 85 (or perhaps if you won’t reach it at all), it may be worth reassessing what your budget could look like.  Perhaps there are ways that you can reduce your spending now – like making the most of HealthNav’s Market Place savings on your shopping – so that you have a little extra to contribute towards your future savings or pension pot.

Depending on the kind of pensions that you hold, there are several ways you can use the money in your pension to provide you with income or lump sums in retirement. Different options can provide different amounts of income, so if you have income goals in mind but you’re unsure on how best to utilise your pension pots, it’s best to seek professional financial advice from partners like Morrinson Wealth Wellbeing.

5. Consider other income

You might also have other sources of income you can use in later life, aside from your pensions. This income is likely to vary over time and might not be guaranteed for life.

This income could come from:

• part-time work
• pension pot you’ve invested and can draw a flexible income or lump sums from
• savings and investments. The amount of interest or income you earn is likely to vary depending on interest rates and the performance of your investments
• Property: this could be rental income from a property you own, or you might plan to sell the property and raise money to supplement your income
• Your home: you might rent out a room to a lodger, plan to downsize and use any money raised to supplement your income, or sell some of the equity in your home in return for a lump sum or income

When you’ve worked out how much money you’ll need, and the sources of income you’ll have in the future, you’ll have a clearer idea of when you can afford to retire.

6. Check your position and boost your pot if you need to

Now you know how much income you might need later in life and when they might begin paying you an income and/or a lump sum, you can look to make a plan.  Are you nearing retirement and the amount you’re likely to retire on is less than you’d hoped? There are still things you can do to boost your pension before then. Two ways of increasing your pension pot are to:

• pay more into it, and
• put back the date you start taking money from it.

This allows you to increase the amount you’ll have to retire on and reduce the amount needed due to having a shorter overall retirement.

7. Continuously Monitor and Adjust Your Plan

Life is unpredictable, and your plan should remain flexible too. Regularly review your goals and financial situation. Make adjustments as necessary to stay on track. Life events, changing financial markets, or shifts in your goals may require modifications to your plan.

8. Seek Professional Guidance

Financial future planning can be complex, especially in the UK with its distinct pension landscape. Consider seeking professional guidance from a financial advisor like Morrinson Wealth Wellbeing who specialises in UK retirement planning. They can help you navigate pension options, investment strategies, and future income planning.