A major new study by Standard Life into the retirement attitudes and expectations of nearly 5,000 people has revealed the top things people wish they’d known before retiring. And there’s a lot that we can all learn with the benefit of retirees’ hindsight.
More than a quarter of retirees wish they had saved more for their retirement. And others say they wish they’d spent more in the early stages of life after work when they were still fit and active.
Whether you’re just starting to save towards life after work, wondering what age you will be when you can afford to retire or putting the final touches to your retirement plans, there’s a lot to learn from a major new study by Standard Life.
Bringing retirement into focus asked retirees what they wish they’d known, in surveys and a series of focus groups. We share four key findings and some tips that might help you get the retirement you want.
1. 26% of retirees wish they'd saved more
When you’re young, saving for retirement may not feel like a top priority, or maybe you just don’t know where to begin. But a quarter of retirees say they wish they had saved more. And among less affluent people the number rises to 40%.
Your pension is one of the most tax efficient ways to save for life after work. Here are some simple steps that could help you save enough for the retirement you want.
Take advantage of your pension plan
It may seem obvious that your pension plan can be the best way to save for retirement, but do you know why? It offers benefits which make it easier and more tax efficient to save more, so it’s good to get familiar with how it works early on.
One of the best things about your pension plan is the tax benefits it provides. Put simply, an extra amount is added to your pension contributions based on the rate of income tax you pay. So it effectively means it’ll cost you less to save more into your pension plan.
Find out more about how it works and how you can use it to boost your pension savings in our recent article about pensions and tax. You can also find out about the other benefits of your pension plan in our article, What’s so good about a pension?
If you’re just starting out and haven’t given your retirement plans much thought yet, consider this piece of guidance from one of the retirees who took part in our focus groups: “The older me wishes I’d had the foresight to start earlier. Maybe then I’d have been in the position to retire much earlier and do things whilst I’m still young enough.”
Don’t underestimate the difference a small change can make
For many, it can make sense to pay as much as you can afford into your pension plan, even if that means increasing the amount you currently pay in by a small amount. It can all add up over time.
On top of tax benefits, if you’re part of a workplace pension scheme your employer might also offer a matching scheme. This means the more you pay in, the more they will too.
If you want to see how much you might currently be on track to retire with, try our pension calculator.
You may want to consider getting financial advice before making any decisions. If you don’t have an adviser already, you can find one at unbiased.co.uk, and remember that there will likely be a charge for advice.
2. A quarter of retirees say they underestimated how long they'll be retired for
Pre-Covid, longevity was generally increasing, so your pension pot might need to last longer than you think.
A quarter of retirees say they wish they’d known they’ll be retired for longer than they thought. Furthermore, 13% say they underestimated how much money they would need throughout their retirement and 6% say they spent too much in the early stages of retirement and this affected their standard of living later.
As one participant put it: “My mother said if she had a crystal ball she wouldn’t have spent so fast – she lived to 86.”
When considering how long you may be retired for and how much you might need to cover it, don’t forget that the cost of living is rising too. The good news is the money in your pension plan is invested, which means it has more opportunity to grow and beat the impact of inflation, although this can’t be guaranteed. You can find out how investing can help you reach your financial goals in Why invest instead of save?
Think about your investment choices
It’s also a good idea to think about your investment choices. Your investments can make a big difference to how long your money will last in retirement. It’s important to think about the options available to you and your attitude to risk, which may change as you go through life. While you’re young, you could think about taking a little more investment risk to give your money more opportunity to grow, while still having the benefit of time on your side to ride out any market fluctuations. Of course, investment growth isn’t guaranteed. The value of investments can go down as well as up and you may get back less than was paid in.
For more about pension investments read How to prep your pension savings for retirement.
3. Some retirees overestimated how much they'd need
For a significant number of retirees there are a different set of concerns. One in five say they wish they had known they wouldn’t need as much money as they expected.
If you’re approaching retirement or in the early days of life after work it’s worth considering that 7% of retirees also say they curbed their spending too much during the early stages of retirement when they were still fit and active because they were worried about running out of money later.
A happy retirement means something different to everyone. The amount you need will largely depend on the kind of lifestyle you’d like to have, including hobbies, travel and leisure.
If you’re trying to decide how much you might need to fund the lifestyle you’re looking for, the Retirement Living Standards are a good place to start. They give you an estimate of the amount you might need for a minimum, moderate or comfortable lifestyle in retirement. They break down the costs for a single person or a couple and even take into account yearly expenses like birthday presents and clothing.
4. Many wish they had planned more thoroughly
The importance of planning came through strongly throughout the whole study with 17% of retirees saying they wish they’d planned for retirement more thoroughly. One retiree told us: “I’ve told my children to learn from my mistakes and plan earlier.”
Our study highlights some of the emotional and financial benefits that planning can bring. Those who plan are more likely to feel confident about their financial decision making than non-planners, expect to retire earlier, think their money will last longer and, for those already retired, are more likely to enjoy their retirement (89% vs 78%). Despite this, 73% of people say they are doing little or no planning for how much money they will need in retirement.
So, how can I start planning?
There are some big questions you can think about answering to get started. When do I want to retire? How much will I need? How much am I on track to have?
A great starting point is our step-by-step retirement planning guide to help create your plan. You can also find some general information on retirement to get your knowledge up to speed in our online guides.
For more insights take a look at the full Bringing retirement into focus report on our website.
The value of investments can go down as well as up and may be worth less than was paid in.
Tax and legislation may change. Your personal circumstances and where you live in the UK will also have an impact on your tax treatment.
The information here is based on our understanding in October 2021 and shouldn’t be taken as financial advice.