Financial planning for retirement

Shirley: Hello, I'm Shirley Ballas and welcome to Rewirement, the retirement podcast from Legal & General. I'm on a mission to help you reset, reinvent, rewire for the retirement you want. Every fortnight I'm joined by fabulous retirees and would- be retirees, with their own unique take on retirement.

Tracy: Now that I'm entering my 50s, maybe it's a rite of passage and I need to start talking about these things with my friends.

Shirley: Plus my brilliant panel of experts will be diving in to tackle the big questions. They’ll share their suggestions to help make your post- work years the most exciting of all. There’s a reason this program’s called Rewirement.

For many people, retirement involves a change of pace, a different outlook and a different day- to- day. But before you get there, it's important to put yourself in the best position possible, both financially and in your attitude to  money.

Fortunately, the experts are here to tell you what you can do at any age to get yourself ready and steady before retirement day comes. Emma Byron and Holly Mackay will be with me in the studio later, but first let's catch up on our retirement planning friends.  I’m chatting to Debbie today.

Debbie: My name’s Debbie. I’m 50- years- old and I am still working. I think this time of life is particularly exciting because I feel financially more comfortable than I have done in the past. The children are less reliant on me, on us, should I say? And we're now looking forward to retiring sooner rather than later, and hopefully enjoying it while we still have the physical capacity to do so.

Shirley: She’s only just beginning her journey to working out her retirement finances. And I wanted to know what sort of questions are in her head. Debbie, what else do you think needs to be done to help you get to a place where you're really comfortable with your retirement plan?

Debbie: I think, first of all, I need to work out exactly how much I currently have. So, find all my pension pots, actually get answers about what the yield is going to be when I do retire and plan that way.

Maybe it's time at the moment while we're relatively secure, touch every piece of wood I can find, to put more aside, maybe that's the answer, maybe I'll have to do that. I think if everything went tomorrow and we had to retire, we would downsize and we'd be okay, because  again, it's down to house property value, isn't it? So, our house, if we sold it now, we could get something in the West Country, much smaller for a lot less money and be mortgage free.  So, there's always that kind of safety net, if you like, but yes, maybe we should be putting more away.

But the other  thing  is  that  the  retirement  age,  I  mean,  when  will  that  be?  When realistically, can you look to retire? It's so different  now  to  how  it  used  to  be.  I  mean,  my  husband's  a  police  officer,  but  he  hasn't  been  in  the  force since  he  left  school. 

So,  the  usual  rule  is  30  years and  that's  it,  you  retire, but  he  hasn't  got  that  because  he  started  so  late.  So,  he's  going  to have  to  keep  going  until  he's reached a certain  amount  of  pension  that  he's  built  up.  I  don't  know  how  long  I'll  have  to  work  before  I've  got  a  decent  amount  saved  up.  It's  all  very  different,  very  different  now.

Shirley: Today’s society is a lot different. Isn’t it? Most people aren't  thinking about that and what's going to  happen when they turn 60 or how they're  going  to  manage,  well,  not  the  groups  of  people  I  talk  to,  anyway.  Debbie, when you retire, how much  money  do  you  think  you're  going  to  need?  Would  it  be  80%  of  what  you're  earning  at  the  moment,  50%  of  what  you're  earning?  What  do  you  think  you  will  need  when  you  retire,  to  live  on?

Debbie: I  honestly  don't  know,  we  haven't  sat  down  and  done  the  sums.  I  think  we've  always  been  assuming  that  because  of  my  husband's  final  salary  pension,  we  will  be  able  to  pay  off  the  mortgage.  So,  in  my  head,  whatever  we've  got  from  pension  income  from  that  point  will  have  to  do,  and  that's  kind  of  where  I'm  at  and  that's  probably  not  the  best  way  to  look  at  it.  I  should  be  thinking  ahead  more. 

But  I  think  once  the  house  is  paid  off,  everything  else  you  can  make  do  with.  I'm  in  a  situation  where,  because  I've  worked  in  so  many  different  places,  I've  got  lots  of  little  bits  of  pension  and  savings  and  stuff  all  over  the  place.  And  quite  recently,  actually,  I  tried  to  get  it  all  in  one  place  and  I'm  still  doing  that,  and  I  absolutely  hear  you.  It  is  so  important  for  everyone  to  know  where  everything  is,  because  if  I  can't  keep  track  of  it,  no  one's  got  a  hope  when  I  go.

Shirley: That's exactly what I'm going to do as well. Debbie, is it good to talk about money? Are you comfortable talking about money with your husband and your children?

Debbie: Yes. Very comfortable talking to my husband about it. That’s absolutely no problem at all. I think, as a  society, we don't really talk about money, especially retirement  and  the  savings  and  insurance  and  things  like  that.  As  you  said,  it  goes  back  to  death,  doesn't  it?  People  don't  want  to  talk  about  that  kind  of  thing,  but  I  think  that  people  should  talk  about  it.

I  actually  had  a  financial  advisor  in  my  very  first  job,  so  I  was  21,  and  he  came  in  and  he  talked  to  me  very,  very  rationally  about  what  I  ought  to  be  doing  at  that  stage,  and  of  course,  I  didn't,  but  I  did  make  a  start.  And  I  think  the  more  people  that  know  about  that  early  on  and  actually  take  it  on  board  and  listen  and  do  something  about  it,  they'll  be  a  much  better  position  when  they  get  to  retirement.

Shirley: Is there anything you would change moving forward?

Debbie: Yes. I think I'm probably going to consider my kids more. It is a completely different state of  play  now  with  the  kids  growing  up  and  getting  onto  the  property  ladder.

Shirley: So,  Debbie,  what  the  most  pressing  questions  you  have  around  financial  planning  for  retirement  and  what  questions  do  you  think  others  will  also  be  confused  over?

Debbie: I'm  not  a  100% clear  exactly,  at  the  moment,  what  I  will  end  up  getting  when  I  do  retire.  And  I'm  aware  that  things  change  as  life  goes  on,  and  rates  change  and  go  up  and  down,  and  investments  change.  Bearing  in  mind,  I  have  quite  a  few  different  pots  of  money  in  different  places,  it's  not  a  100%  clear  what  I'm  looking  at.  I'd  like a little  bit  more  education,  really,  and  to  understand  more  what  each  of  these  pots  of  money  does,  how  it  performs  and  what  the  effects  of  different  things  in  the  economy  is  going  to  have  on  it.

Shirley: Colin  and  Tracy  are  still  working,  but  have  a  few  options  on  their  plate.  I  asked  them  to  compare  notes  on  where  they  seek  advice.

Tracy: In  the  past,  I  have  spoken  to  an  independent  consultant,  many  years  ago,  actually.  And  I think  that  was  recommended  through  a  friend.  But  I  think  my  current  context,  at  the  moment,  I  haven't  really  sought  advice  in  terms  of  where  I'm  sitting  now,  because  it  was  a  few  years  ago. 

I  probably  could  go  online  and  get  some  advice  via  the  teacher's  pensions,  government  pension,  and  maybe  get  in  touch  with  people  there to  find  out  a  bit  more  about  what  it's  going  to  look  like  and  what  my  options  would  be.  I  prefer  face- to- face,  though,  and  talking  with  somebody. 

So,  I  feel  as  though,  perhaps,  I  haven't  sought  as  much  advice  as  I  should  have  done  because  I  don't  know  at  the  moment  what  my  options  are.  I  would  probably  go  back  to  teacher's  pension  and  maybe  try  and  get  another  independent  financial  advisor,  perhaps,  to  talk  about  ways  forward  and  what  it  will  look  like  in  the  future.

And  surely,  there  must  be  some  sort  of  badge  of ...  That  they  would  be  accredited  to  or  signed  up  to,  to  know  that  they  are  a  good  financial  advisor,  providing  robust  advice  and  legal  advice  to  you.  Now,  I  don't  usually  talk  about  such  matters  with  my  friends,  but  perhaps  we  should,  now  that  I'm  entering  my  50s,  maybe  it's  a  rite  of  passage  and  I  need  to  start  talking  about  these  things  with  my  friends.

Shirley: I  mean,  you  don't  have  to  tell  them  what  you're  worth.  You  don't  need  to  say  how  much  money  you've  got  or  what  you're  thinking  about  investing.  You  can  just  have  a  conversation  about  investment,  about  pension  policies,  about  the  future.  What did they do for their children?  What are they thinking about doing for their children?  What are they leaving?  Or talk about the mortgage, is it paid off?  Isn’t it paid off? I  think  the  more  that  you  can  communicate,  the  easier  these  decisions  are  to  make.

Tracy: Talking about it is only going to help. Isn’t it?

Shirley: Colin,  where  do  you  seek  your  advice  when  it  comes  to  your  pension  plans?  Do you  have  anybody  special,  anybody  in  mind?

Colin: I  did  have,  when  I  first  set  up  the  schemes,  when  I  first  started  my  unlimited  company,  there  was  a  financial  advisor,  who'd  been  recommended  to  me  by  a  friend  who  was  just  round  the  corner  from  where  I  worked.  And  I  worked  there  for  about  seven  years  and  it  probably  isn't  a  coincidence,  but  when I  left  that  organization  and  went  somewhere  else,  80  miles  away,  it  was  never  convenient  to  just  pop  round  and  see  the  guy  to  talk  about  where  we're  at,  do  we  need  to  re-plan  things? 

Do  I  now  need  to  take  out  this  sort  of  insurance  plan? 

How would my pension go in?  Although,  he  was  only  ever  on  the  end  of  a  phone,  this  was  probably  still  pre- mobile  phone  days.  So,  yeah,  he  was  good.  What  actually  happened  was  that,  fairly  soon  after  I  took  out  some  of  the  schemes,  that  a  lot  of  consolidations  and  mergers  and  acquisitions  took  place.

 So,  it  seemed  like  every  time  your  plan  settled  down,  it  then  got  acquired  by  somebody  else.  And then, two years later, somebody else acquired  it.  And  so,  it  got  to  the  stage  where  you  thought, " I  now  don't  know  whether  that's  the  plan  that's  suitable  for  me." 

So,  that's  probably  about  the  time  that  I  stopped  contributing  to  them,  and  since  then,  I've  generally  done  all  the  research  myself,  a  lot  of  homework,  very  rarely  rush  into  making  any  decisions  of  that  type.  My  friends  and  family would  tell  you  I'm  a  bit  of  a  spreadsheet  nerd,  in that  I  put  all  the  information  into  spreadsheets,  analyze  it,  and  that's  how  I  make  my  decisions.

Shirley: Remember David and Marcus?  Our choir singers.  David  retired  after  a career  in  finance,  but  Marcus  is  still  working  in  his  own  business.  I asked them if they  prefer  to  educate  themselves  or  take  advice  from  specialists? David was first to answer.

David: I  mean,  because  I've  been  involved  in  finance  and  I'm  interested  in  it, I  was  never  likely  to  ignore  this  field,  but  when  you're  busy  and you're working  all  hours  in  practice,  you  don't  do  much  more  than  make  cursory checks  on  statements  that  come  in. 

And even, when  I  look  back  at the  information  that  I've  received,  when  I've left jobs  and  so  on,  that they've  been  quite  a  lot  of  errors  and  inconsistencies  in those,  which  I  didn't  pick  up  at  the  time.  So,  it  is  much  more  recent, I would say,  from  perhaps  my  mid- 40s  onwards  when  I  started  to  look  in  to  a  little bit  more  detail,  but  I'm  still  learning.

My  wife  is  not  particularly  engaged  and  she  didn't  do  a  frontline  role.  She was  secretarial  for  the  general  management.  And  I  think  it's  fair  to  say there's  more  linguistic  than numerate  in  terms  of  her  skill  preference. 

So,  I  involve  her  in  the  decisions  or  I  tell  her  what  I'm  planning  to  do,  but she  really  does  leave  it  to  me.  She  has,  I  think,  after  I  made  one  error,  I mean,  the  worst  financial  decision  I  probably  took  was  on  her  final  defined benefit  pension  with  the  bank  that  she  worked.  So,  she's  never  quite forgiven me  for  that,  but  hopefully  I  do  get  more  things  right  than  the  wrong  in regard  to  her  pension  situation.

Marcus: I'd  like  to  be  in  the  room  when  David's  wife  hears  that  he  thinks she's  more  literate  than  numerate.  There  are  three  of  us  directors  in  the  firm where  I  work  and  our  financial  interests  are  therefore  very  much  intertwined and  that's  been  fantastic  because  the  three  of  us  have  gone  through  this journey  together  and  have  had  a lot  of  chance  to  talk  through  and  discuss how  we  wanted  to do things. So, I think  that's  been  my  main  support  group and  my  main  way  of  finding  out  the  options.

Shirley: It's  great  to  hear  how  our  would- be  retirees  are  looking  ahead  and asking  the  big  questions.  So,  what  do  you  need  to  ask  yourself  to  get  the basics  right  in  retirement?  And  do  you  need  to  have  it  all  worked  out  before the  big  day  arrives? 

I'm  joined,  once  more,  by  Legal &  General's  Emma  Byron,  managing  director of  retirement  income,  as  well  as  Holly  Mackay,  founder  of  Boring  Money. What  a  dream  team  to  give  your  financial  planning  a  boost,  welcome  both. Emma,  for  some  people,  their  retirement  might  be  almost  as  long  as  their working  life.  When  do  you  begin  to  even  work  out  the  numbers  for  that?

Emma: I  think,  if  you  look  at  it  in  that  way,  then  it  feels  like  a insurmountable  task,  really,  to  undertake.  I  don't  think  any  of  us  start  our working life  thinking  about  planning  for  the  next  30  years. 

That's  for  sure.  Most  of  us  all  work  out  what  we're  going  to  be  paid,  and then  what  that  means  we  can  afford  in  rent  or  mortgage  and  how  many times  a  week  we  can  go  out.  So,  I  think  people  should  try  not  to  see  it  as something  completely  different  to  that.  The  first  step  is  really  to  understand the  assets  that  you've  got,  what  retirement  income  sources  you  might  have. So,  get  your health  in  order.

Think  about  all  of  those  sources  of  assets,  think  about  maybe  consolidating your  pension  pots,  so  you've  got  all of  that  information  in  one  place,  to  make it  easier  to  manage.

The  government  certainly  offers  a  very  basic  tracing  service  for  lost  pensions, but we'll  also  at  Legal &  General,  we'll  be  launching  our  own  tracing  service later  this  year,  which  will  help  people  to  do  exactly  that. 

Find  everything  they've  got,  put  it  in  one  place.  I'd  always  say  though,  it's not  just  about  what  you'd  consider  to  be  retirement  assets,  but  also  any other  assets  that  you  have,  like  bonds  or  savings  accounts,  ISAs,  et  cetera. 

So,  in  the  same  way  as  you,  at the start of  your  working  life  would  be thinking  about  what  money  you're  going  to  have  each  month,  it's  the  same thing  really  for  retirement,  getting  that  in  order.  And  then,  you  can  start thinking  about  a  different  range  of  scenarios,  none  of  us  know  how  long we're  going  to  live  for, or  how long we're  planning  for,  or  therefore  how  long that  money  needs  to  last  you.

So,  rather  than  try  to  pin  yourself  on  the  average  life  expectancy,  I  don't think  any  of  us  would  consider  ourselves  to  be  average.  I  think  it's  about looking  at  about  a  different  range  of  scenarios.  How  would  you  manage  if you  live  to  110  versus  if  you  live  to  80,  and  think  about  it in  that  way, rather than trying  to  pin  yourself  to  a  single  lifelong  plan.

Shirley: Okay.  Do  you  have  to  have  it  all  worked out  in  your  40s  or  can  you adapt  and  change  your  plans  as  you  go  along?

Emma: Well,  I'd  hope  you  don't  have  to  have  it  all  worked  out  in  your  40s. I'll  be  40  in  a  few  months  and  I  certainly  haven't  got  life  all  worked  out, that's  for  sure. 

So,  I  think  as  you  approach  your  40s,  it's  is  a  good  time  to  be  thinking about it.  You  want  to  make  sure  that  you  are  thinking  about  retirement  early enough  on,  to  make  sure  that  you  save  enough  money. 

And  also, I  think  that  people  get  familiar  with  some  of  the  concepts  and  the products  and  so  on,  that  you  might  want  to  use  in  retirement. 

The  earlier  you  do  that,  I  think,  the  easier  it  is  when  you  come  to retirement, doesn't  feel  like  such  a  daunting  decision,  if  you've  engaged  with  your retirement  savings  much,  much  earlier. 

In  terms  of  if  you  end  up  living  longer  than  you  expected,  again,  it's  about, I think,  scenario  planning,  thinking  about  if  you  did  live  longer,  is  there  a different  source  of  asset  that  you  might  want  to  draw  down  on?

So,  perhaps  you'd  want  to use  your  housing  equity,  for  example,  as  a backup plan,  if  you  run  out  of  money  or  you  live  longer  than  you  expected,  and then obviously  having  some  form  of  secure,  guaranteed  income  through  retirement, such  as  an  annuity  or  a  defined  benefit  pension,  if  you're  lucky  enough  to have one  of  those,  also,  will  just  give  you  a  bit  of  peace  of  mind  that  you will  have  sufficient  money  to  at  least  meet  your  basic  living  needs.

Shirley: Lots of notes there.  Holly,  what  sort  of  people  do  you  get  coming  to you  for  help  with  their  retirement  finances?  What are the most common questions you hear?

Holly: We  get  all  sorts,  is  the  honest  answer,  we  had  about  half  a  million people  on  our  site  last  year,  from  people  with  millions  of  pounds  to  invest looking  for  tips,  to  people  who  had  20  pounds  a  month  to  save  into  an  ISA. So,  all  sorts. 

What  I  would  say  is  amazing,  pretty  much  everyone  I  ever  talk  to  about money,  secretly  feels  really  stupid  about  it. 

They assume  that  everyone  else  is  smarter  than  them,  better  at  math  than them,  richer  than  them,  more  organized  than  them.  So,  I  tend  to  spend  a  lot of  time  saying  to  people, " It's  not  that  you're  dumb,  it's  that  the  industry explains  it  in  such  a  boring  and  a  complicated  manner."

So,  I  try  and  put  people  at  ease.  This  is  baffling  for  many  of  us.  The  most common  questions  I  hear,  I  think,  are  sometimes  it's  just, " Where  the  hell  do I  start?  Should  I  be  saving  into  an  ISA  or  a  pension?  Or  what  do  I  do there?"  Risk  is  a  really,  really  common  question.  People  saying, " How  much might  I  lose?"  Actually,  is  the  thing  that  most  people  start  off  wanting  to know, " How  much  could  I  make?" 

And  then  around  retirement  as  well,  people  even  ask, " When  can  I  retire?" As  if  that's  the  job  of  a  pension  company  to  tell  them  that,  it's,  I  think, because  it's  such  a  baffling  area,  people  expect  that  someone's  going  to  tell them  what  to  do.  So,  it's  trying  to  work  with  people  to  help  them  understand the  choices  that  ultimately  are  theirs  to  make. 

Of  course,  when  you  retire  is  up  to  you.  And  as  we'll  go  on  to  discuss,  I suspect,  dependent  largely  on  how  much  money  you've  got  saved  up,  but also  in  what  you  want  to  do.

Shirley: We  heard  a  few  different  experiences  of  advice  from  our  Rewirees. What would you recommend in regard to advice?

Holly: I  think  is  difficult.  I  mean,  the  reality  is  that  advice  still  can  be  quite a  tainted  brand  and  lots  of  people  don't  trust  financial  advisors,  but  the  world has  changed  over  recent  years. 

And  there  has  been  a  split  now  between  advisors  getting  any  sort  of financial encouragement  to  recommend  any  particular  brands.  So,  that  bias  that  was there  in  the  past,  isn't  there  anymore.  And  I  think,  in  general,  the  profession is  a  lot  tighter,  a  lot  better  than  it  used  to  be.  Something  else  other  people don't  really  know,  is  that  you  can  pay  on  an  hourly  basis  for  financial advice. 

You  don't  have  to  lock  yourself  into  a  lifelong  relationship,  and  fees  range from  about  150  pounds  an  hour  to  200  pounds  an  hour.

So,  sometimes,  if  you  just  want  a  steer  that  you're  not  doing  anything  daft, you  might  be  able  to  look  at  that  as  an  option.  And  there  are  other services. One,  I  think  that's  quite  interesting  for  people  coming  up  to  retirement  is called  a  cashflow  modeling  service. 

Now,  this  will  set  you  back  typically  about  two  or  3, 000  pounds,  but  you  sit with  an  advisor  and  you  say, " This  is  how  much  I've  got."  And  they  work  it through  with  you  and  effectively  see  if  your  plans  are  affordable  or  whether you're  likely  to  run  out  of  money  or  not. 

So,  there  are  bite- sized  ways  you  can  get  financial  advice  without  having  to think  that  it's  an  ongoing  relationship  for  life.

Shirley: Emma,  from  your  experience,  what  do  you  think  are  the  common pitfalls  people  have  in  terms  of  their  mindset?  For  example,  do  people assume  they  won't  live  as  long  as  they  do?  Do  they  overspend  in  the  first few  years?

Emma: I  think  the  first  mistake  people  often  make,  or  the  common  pitfall  for people  is  that  they've  put  their  head  in  the  sand.  They're  scared  to  think about  retirement.  They  don't  understand  the  terminology. 

People  who have  to  kind  of  bite  the  bullet  and  spend  a  day  really  thinking about  retirement  and  trying  to  understand  it.  And  there's  lots  of  tools  out  there  and  information  out  there from  the  government  in  terms  of  Pension Wise and  also  on  providers,  websites  and  so  on.  So,  I  think  the  second  one,  as you  mentioned,  people  do  underestimate  how  long  they'll  live  for. 

Often,  people  will  use  an  indication  of  how  long  their  parents  have  lived  for and  expect  that  that's  how  they  themselves  will  live  for.  But  as  we  know, people  are  living  longer  and  longer  thanks  to  medical  science  and  healthier lifestyles,  and  so  on,  is  much  more  related  to  education,  socioeconomic factors,  lifestyle  factors,  do  you  drink  lots, do  you  smoke?

None  of  us  are  average.  Looking,  there's  life  expectancy  calculators  out there, that  would  allow  people  to  plug  in  some  information  and  see  how  long  they are  expected  to  live  for.  But  by  definition,  that's  an  average.  So,  some people  will  live  for  a  lot  longer  than  that  and  some  people  for  less  time. 

So,  I  think  around  that  point,  it  would  be  back  to,  I  think  it's  planning  for different  scenarios  and  really  thinking  through  if  you  were  to  live  significantly longer  than  you  expected,  how  would  you  manage  that? 

I  think,  in terms  of  overspending  in  the  first  few  years,  that  there's  a  mixture of  evidence  around  that.  We  see  and  we  expect  that  the  jubilation  and excitement  of  being  retired,  off  you  go  on  many  cruises  and  fulfilling  the travel  desires  that  you  might  not  have  been  able  to  do,  when  you're  retiring or  giving  grandchildren  money,  et  cetera  and  now  you  have  access  to  this additional  funds.

So, I  think  there  is  definitely  a  risk  that  people  fall  into  that  trap,  but  saying that,  as  long  as  you've  thought  a  little  bit  further  ahead,  and  you  still, despite that  perhaps  excessive  spending  in  the  first  few  years,  are  comfortable,  you have  enough  to  last  later,  that's  not  necessarily  something  you  can't  do,  but again,  it's  just  about  thinking  through  and  planning  for  the  different  options and  having  some  flexibility  in  your  spending.

Shirley: And  I  think,  like  you  said,  also,  I  mean,  I  find  it's  difficult  to  even talk  to  my ...  It's  difficult.  People  don't  want  to  talk  about  finances,  but  it is  a subject  that  needs  to  be  pushed  and  you  have  to  talk  about  it,  I  feel.

Emma: Agree.  I  mean,  from  my  perspective,  I  think  it's  the  last  remaining taboo  in  the  world,  people  are  much  more  open  about  sex  and  different things  like  that.  But  money  is  really  the  last  taboo,  people  don't  discuss  how much  money  they  earn. 

People  don't  discuss  what  savings  they  have,  even  with  their  closest  family. And  really, it  is  something  that  needs  to  change.  Not  that it  means  people have  to  go  around  and  shouting  about  how  much  they're  worth,  but  certainly they  need  to  be  able  to  discuss  that  in  order  to  make  sensible  decisions.

Shirley: Is  it  ever  too  late  to  start  saving  for  retirement?

Emma: It's  usually  the  meaningful  moments  in  people's  life  where  they  start to think  about  saving  or  pensions,  I  often  use  the  example  that  when  you're in hospital,  after  having  a  baby,  you're  given  a  bounty  pack,  which  has  lots of leaflets  in  there  about  setting  up  wills  and  that  sort  of  thing,  because  that's usually  the  time  at  which  people  would  think  about  that.  Once  you  have children  and  you  think, " Well,  I  better  have  a  will."  And  start  thinking  about those  things  more  seriously. 

So,  I  think  it's  not  necessarily  a  typical  age  where  people  start  thinking seriously  about  things.  It's  normally  something  that  happens  in  their  life.  I mean,  certainly  as  you,  as I  said,  get  towards  your  40s  and  you've  probably been  working  for  20  years,  you  start  thinking, " God,  how  much  longer  am  I going to  be  working  for?"  And  that's  the  time  where  you  do  start  to  think  a little  bit  more  about  whether  you've  been  saving  sufficiently  for  your  pension or  not.

And I think,  definitely  people  approaching  their  40s  should  be  encouraged  to take  a  financial MOT,  if  you  like,  and  look  at  what  they've  got  today  and  are they  saving  enough?  Because  at  that  age  you  still  got  time  to  correct  the amount  you're  saving,  if  you've  been undersaving  up  until  that  point.  So, you've  got  time  to  improve  it  and  make  sure  you're  going  to  have the retirement  that  you  want.

Shirley: Lots  of  people  don't  save  nearly  enough  into  their  pension.  What  are the  options  when  there  won't  be  enough  to  live  on  when  they  retire?

Emma: Clearly,  if  someone  is  reaching  retirement  age  and  they  haven't  saved into  their  pension,  it's  a little  bit  late  to  use  a  pension  as  the  source  of  your retirement  income,  but  people  typically  will  have  other  assets.  So,  if  they've been  prioritizing  buying  a  house  and  paying  their  mortgage  throughout  their life,  which  meant  they  had  nothing  left  after  paying  all  the  bills  to  save  into a pension  product,  their  house  is  an  asset  that  they  can  utilize. 

And  many  people,  particularly  coming  to  retirement  now,  who  don't  have huge amounts  of  pension  savings  and  may  not  be  lucky  enough  to  have  a  final salary  pension  anymore.  They  do  have  a  lot  of  housing  wealth,  and  they may  want  to  downsize  there,  which  gives  them  one  way  of  accessing  that money.  Or,  if  they  want  to  stay  in  their  home,  then  using  lifetime  mortgages is  another  way  in  which  you  can  utilize  the  equity  in  your  house  in  order  to provide  you  with  money  to  live  off  in  retirement.

Shirley: What  do  you  think  are  the  possible  pitfalls  when  people  manage their own  pension  income?

Emma: People  often  don't  plan  for  different  scenarios.  They'll  plan  for  the average  market  return  that  they  expect.  And  so,  when  there's  significant  falls in  the  market,  they  find  that  they  haven't  really  allowed  for  that. 

I  think  people  also  often  panic  quite  a  lot  in  times  of  market  downturn  and then  choose  to  do  things  which  are  not  necessarily  the  most  rational,  such as  switching  to  cash  and  so  on,  which  would  mean  the  assets  wouldn't recover.  I  think  another  thing  that  people  should  always  consider  and  I'm sure,  or  I  hope,  Holly  would  agree  with  me  is  having  enough  liquidity  or  a cash  buffer  around.  It's  important  that  you  have  some  level  of  cash  buffer available  to  you. 

That  doesn't  always  mean  just  keeping  it  in  cash,  that  there  are  different liquid  assets  you  can  use  where  you  could  be  able  to  access  the  money easily,  but  you're  earning  more  than  a  cash  return.  Products  such  as  fixed term  annuity  product,  zero  income  annuity  products,  allow  you  to  put  the money  away,  but  should  you  need  to  surrender  it  or  partially  surrender  at any  point  then  you  can.

Shirley: This is  so  interesting.  Holly,  any  other  do's  and  don'ts  for  minimizing the  worry  in  the  run  up  to  retirement?

Holly: Yeah,  Shirley,  I  think  pensions  are  like  kind  men.  You  only  realize  in your  40s  how  attractive  they  are  and  when  you're  in  your  20s,  they're  just boring.  Most  of  us  will  always  look  to  our  retirement  and  think, " Golly,  I  wish I'd  done  more  earlier.  I  wish  I'd  started." 

So,  I  think  we  just  have  to  get  over  that  and  park  that.  We  are  where  we are.  To  me,  I  worry  about  things that  I  can't  see.  I  worry  about  things  I don't  fully  understand.  So,  I  think  the  starting  point  is  work  out  how  much  you've got  and  think of  your  retirement  income  like  a  cocktail  with  three  shots. 

You've  got  your  state  pension,  the  full  state  pension,  if  you're  eligible  for that, you  can  check  on  the  government's  website,  is  about  9, 000  pounds  a  year.

The  second  element  will  be  any  workplace  pension  you  have,  that  might  be an  old  final  salary  scheme.  It  might  be  a  workplace  pension  you  have  today. Now,  find  out  how  much  you've  got  in  total  in  your  workplace  pensions. 

And  a  helpful  rule  of  thumb,  I  think,  is  to  work  out  how  much  that  might buy you,  a  year,  in  terms  of  retirement  income.  Divide  it  by  about  20 or 25  and that'll  give  you  an  indicator  of  what  annual  income  you  might  expect  from that  chunk  of  money.  And  then,  the  third  short  is  just  other  sources  of assets you  have,  as  Emma  said  earlier,  that  might  be  some  cash  savings,  perhaps some  rental  income,  any  ISAs. 

So,  I  think  jot  it  all  down  and  just  get  a  very  loose  feel  for  how  much you're looking  at.  Then,  when  you  actually  can  compute  that  and  see  it  in  front  of you,  then  you  know  what  your  options  are.

And  we  don't  have  endless  options.  And  for  most  of  us,  if  the  numbers written  down  in  front  of  us,  don't  look  appealing,  our  options  are  either  to spend  less  or  to  delay  retirement  and  consider  some  sort  of  part- time working  or  indeed  delaying  retirement  entirely  for  a  few  years. 

But  I  think  we've  always  got to  start  by  just  trying  to  get  a  sense  in  our head  of  what  that  number  is  and  trying  to  work  through  it.  I  would  say  as well,  Pension  Wise  is  the  government's  free  source  of  help  and  guidance  for people  on  this,  you  can  phone  them  up. 

They  can't  tell  you  exactly  what  products  to  buy,  but  they  can  give  you  a very  good  steer  and  talk  you  through  all  the  tax  consequences  and  all  the jargon  and  all  the  gobbledygook  around  it  and  help  set  your  mind  at  ease  a bit.

Shirley: What  if  someone  has  a  one- off  expense  they  want  to  make  happen, like  a  big  bucket  list  holiday.

Holly: Oh,  doesn't  that  sound  great  right  now?  I'd  love  to  go  on  a  big bucket list  holiday  right  now.  I  think  the  only  thing,  I  think,  when  it  comes  to pensions  and  retirement  income,  I've  seen  it  with  many  people  that  perhaps don't  trust  the  financial  services  industry  or  they  feel  nervous. 

And that  for  some  people, there's  a  tendency,  as  soon  as you can get  your hands  on  your  pension,  you  want  to  take  it  all  away  and  stick  it  under  the mattress  and  it's  mine  and  it's  in  my  control  now.

There  can  be  disastrous  tax  consequences  if  you  rip  great  big  sums  of money  out  of  your  pension,  do  read  up  on  it,  consider  even  taking  one- off financial  advice  or  at  least  make  sure  you  check  out  the  tax  consequences because  I've  seen  lots  of  people  get  burned  that  way.

Shirley: Emma,  can  you  summarize  for  us  the  steps  people  should  take when thinking  about  how  to  use  their  money  in  retirement?  Presumably,  they  need to  start  by  working  out  exactly  what  they've  got.

Emma: Yeah,  absolutely.  So,  I  think  there's  probably  four  main  steps.  The first being,  really,  find  out  all  of  the  assets  that  you've  got,  the  second  thing,  and this  should  be  quite  obvious  to  people,  most  people  budget  on  a  monthly basis  and  know  how  much  they  need  to  cover,  rent,  mortgage,  food  bills,  et cetera.  So,  working  out  your  basic  necessities,

I  think,  is  the  next  part.  And  then,  I  think,  trying  to  plan  what your  other expenditures,  non- discretional  spend  would  look  like  for  30  years  is  a  near impossible  task.  So,  I'd  say,  think  about  that  maybe  over  the  next  five  years, how  many  holidays  do  you  think  you'll  go  on?  How  often  do  you  think you'll go  out  for  meals  with  friends,  family  and  so  on.

So,  what's  that  non- discretionary  spend  that  you  would  need?  What  sources of  income  have  you  got  that  you're  definitely  going  to  get  for  the  rest  of your life,  irrespective  of  how long  you  are  going  to  live  and  is  that  enough  to meet those  basic  needs  that  you've  set  out in  the  second  step? 

And  then,  you  can  start  thinking  about  the  other  assets  where  you  may  have more  flexibility  to  draw  down  on  those  and  move  the  amount  you're  spending up  and  down.  So,  working  that  into  a  retirement  plan,  it  is  important  that people  don't  just  plan  for  a  best  case  scenario,  that  they  also  think  about what  would  happen  if  stock  markets  fell  or  if  they  lived  longer  than expected, or  should  they  need  to  have  care  costs  later  in  life,  to  make  sure  there's  a bit  of  a  buffer  there  and  give  them  even  more  financial  security.

Shirley: Gosh, I  should  write  a  book  on  this, I feel  so  educated.  Well, there's a lot  to  think  about,  but  great  to  know  you  don't  have  to  have  it  all  figured out in  one  go.  I  hope  that's  helped  you  map  out  the  path  to  planning  your finances  and  staying  on  top  of  them  between  now  and  retirement. 

You can find out more about retirement planning legalandgeneral. com/ retirement. Next  time,  we're  looking  at  what  to  do  when  you  actually  get  there  and  how to  enjoy  the  lifestyle  you've  dreamed  of  in  your  Rewirement  years.  Subscribe on your podcast listening platform.  You'll  get  it  on  your  device  as  soon  as  it's available.  Thanks for listening.  I'm  Shirley  Ballas,  and  I'll  catch  you  next  time.