5 things which take less than 5 minutes, that you can do to reduce ‘pension panic’
Hoxton’s recent survey of 1,287 people highlighted some facts that many in the industry already know to be true. The stress people feel when they are ill prepared financially for their future, can have grave effects on their wellbeing.
One of the key findings from our study was that over 70% of people experience ‘pension panic’. This was most often described as a feeling of dread and worry when the topic of retirement savings was brought to their attention.
‘Pension Panic’ is most common amongst people who have not set out a clear plan for their retirement costs. Expats often fall into this category, especially in regions like the Middle East where they typically have no pensions automatically in place through their employer.
A major contributing factor to pension panic is inaction. People who had not made any start of any kind on a pension plan were 38% more likely to worry about this part of their future than those who had.
The number one explanation respondents gave for not having any plans in place was that they simply hadn’t taken the time to do it. As it was what seemed to be a long and complex task, they had deferred it until they were ‘less busy’.
So here are 5 things you can do in under 5 minutes to reduce ‘pension panic’.
1. Write down what you want your retirement to look like.
This may seem obvious, but most people have not actually sat down and written out retirement goals. This doesn’t need to be an essay, just bullet points highlighting key things you would like to do and what type of lifestyle you would like.
2. Do the Maths – how much will this cost?
Be honest with yourself. Saying you will only need £20k a year is in most cases, unrealistic. ‘Shoot for the moon and if you miss you will still be amongst the stars’ applies strongly here. It is definitely better to over plan and over save than under, so think big.
3. Do more Maths – how much do you need to save a month to achieve this?
Desired yearly income in retirement – take this number and add a zero to your desired yearly income =retirement pot 1 (How much you need in a pot if you get 10% growth a year)
Retirement pot × 2 =retirement pot 2, this is assuming 5% growth a year, which is more realistic.
Retirement Age−Current Age × 12 =months until retirement
Retirement pot 2 ÷ total months until retirement =total monthly savings to achieve retirement income.
This will give you an amount you need to save every month if you do not invest. If your savings are invested and compounding over time, this number will be a lot smaller, so the sooner you start, the better.
4. Start tracking your spending.
Download an app that does this for you. Something like Revolut is good as it breaks your expenditure into categories and allows you to accurately see where your money is going. Make sure you review any direct debits and subscriptions so you aren’t being charged for things you don’t use.
5. Start saving.
The easiest way to start saving is using the ‘round up’ or ‘vault’ feature on banking apps. Again, Revolut offers these and they round up every transaction and save the difference into a saving vault. Alternatively, just use one bank account for you spending and every month transfer what you don’t want to spend into another account.
For best results to reduce pension panic, skip the above and get in touch with one of our team today.