What are the Core Success Factors when Investing for Retirement

It’s easy to put off saving for retirement when you have other financial pressures such as skyrocketing rents and rising house prices, on top of a cost-of-living crisis. The Office for National Statistics (ONS) recently reported that the average UK pension pot is considerably lower than it should be for individuals to be able to afford their retirement. For those aged between 35 and 44, it is recommended to have at least £30,000 in a personal pension today, but more than 50% of that age group don’t have this amount.

If you work in the UK as a PAYE employee, you will be enrolled into a workplace pension plan. But you may also want to consider a personal pension – also called a private pension - which you contribute to regularly to boost your retirement savings. There are even tax incentives to doing so as the government is trying to encourage more people to save for retirement.

Sounds easy? It isn’t straightforward which is why professional pension advice is often needed. But there are core success factors that can make retirement planning easier for everyone…

Core Success Factor #1 – Be flexible on retirement date

It’s perfectly fine to have a year in mind for when you want to retire. In fact, having such goals helps to crunch the numbers and plan a retirement strategy. However, your retirement plan may be more successful if you’re willing to be flexible on this date. If you can work for an extra year or two, it isn’t just an extra year or two of income, it’s more time where you won’t have dipped into retirement savings. Some people have been known to “downsize careers” if they need to work longer to reduce workplace stress and feel as though they can keep working.

Core Success Factor #2 – Adjust your risk tolerance

Many personal pension providers use the funds to invest in a range of vehicles, from the stock market to commodities and other investment options. The level of risk you’re exposed to needs to be reviewed frequently and adjusted based on your stage of life and the timeframe until retirement. For example, if you’re getting closer to retirement, especially an earlier retirement, then you may need to adjust your pension investments to reduce risk as you approach the end of your working career.

Core Success Factor #3 – Realism and flexibility in lifestyle

We all have a vision for our retirement, but that vision may not always be realistic. After all, we can only contribute so much of our disposable income to our personal pension, and most people won’t be able to retire and take a holiday each month. It’s essential to set realistic expectations for our retirement to make the retirement plan more successful. Moreover, remaining flexible in retirement can make the plan more successful, such as being open to downsizing the family home as you get closer to retirement.