The importance of securing your retirement income
In these economic times, securing your retirement income is more important than ever.
08:01 19 December 2013
Relying on the state is not something anyone, in these economic times, wants to do. The government has been insisting that all companies engage in some sort of retirement plan to their employees in order to make up for the lack of pension plans available. This new auto-enrolment plan of the government has many people worried. Many elderly people are concerned that despite these efforts, it will not actually be enough to fund everyone’s need as the length of life between retirements and death expands, while inflation causes monetary needs to increase.
Here are the numbers:
- The contribution under the auto enrolment plan now sits at 5%, a 1% increase from the previous contribution
- Employers have to add in 3%, a 1% decrease from the previous contribution
While the contribution amounts are the same, employees are now required to put more in and not have it equally matched. This means that they are going to need to find other ways to make up what would normally be matched by the employer.
Let us look at an example:
In order to have a minimum £50,000 a year retirement income, based on current numbers a nest egg of approximately £850,000 is essential.
A smaller nest egg might very well be good enough to fund your retirement. However, it is good to be careful rather than decimating uncertain factors, which may disrupt your retirement plan. In fact, for most people, this amount is not something feasible without major considerations.
This calls for an adjustment in the scheme of things. For example, an individual or couple can make do with the following so as to increase their nest egg
- Cut back. Reduce spending by any means. They may even sell off their home and purchase or lease a flat or smaller home.
- Wise investments can go a long way to ensuring that your contributions to your pension fund grow each year.
With all the changes, it is more important than ever to start early and make wise retirement choices.