When it comes to saving financially for the future many of us are like the ostrich – putting our heads in the sand to pretend we cannot be seen – except that this is not what ostriches actually do – it is myth first popularised by Pliny the Elder “imagine, when they have thrust their head and neck into a bush, that the whole of their body is concealed.”
Nevertheless just the phrase retirement planning is likely to have most people racing to put the duvet over their heads. If we struggle to manage our finances now how can we possibly save for the future? And, in any case, haven’t pension funds been proved to be inflexible, expensive and mainly for the benefit of those who administer them?
But the reality is that life has changed. Most of us don’t expect to retire completely from one job at 65 with a gold watch. We are more likely to have gaps in working, to work for longer but maybe only part-time. I think we need to recapture retirement planning from pension fund salesmen – maybe rename it future planning and remember some basic truths:
1. Reducing debt is a form of saving for the future so if you are paying capital off your mortgage that all helps
2. Other savings like ISAs are just as valuable especially for those who are not higher rate taxpayers because you can access them sooner if you need them and don’t have to buy an annuity in old age.
3. Any investment can help towards your future planning. It doesn’t have to have a pension label on it. So deposit accounts, shares and unit trusts, buy to let properties all count. If you hate pension funds just ignore them and do your future planning without them.
4. If you get the chance to be part of a final salary pension fund don’t turn it down. This rare commodity is largely only found in the public sector but they are almost invariably very good value for employees.
5. There will be times in your life when you simply cannot afford to save. Don’t worry. If you are unemployed or are paying out for lots of school fees just step the savings down for a few years.
6. There will be times in your life when you can afford to save but decide to spend more instead. Maybe more holidays, more meals out, work on the house. It is not wrong to do these things but if you you consistently never save for the future are you happy that those purchases may require you to live extremely frugally in old age?
7. Have a future plan. Do you know how much you will have to live on when you are in your 60s, 70s or older? When you are young the plan will inevitably be quite vague but by the time you get to 50 it should be coming into focus. If your plan shows a big shortfall between income and expected cost of living you still have time to adjust savings levels.
8. Price your bucket list! It is fashionable to construct a bucket list of things you would like to do before you die. Some of the items on the list may cost nothing. Others may involve long haul travel to exotic locations. If you want to do these things then you also need to plan and maybe save a bit more especially for those dreams.
9. Manage your money now. There are a few people who are highly organised with their money. The rest of us muddle through. It is worth getting today’s finances under control, picking cheaper deals, cancelling things you don’t use, spotting a bargain. Often just doing that might free up enough to start saving. look at websites like Money Supermarket for tips or sign up for a free money management course with CAP
10. Every little helps – as the Tesco ads remind us! Don’t be overwhelmed by the size of the task. Even if you think you are never going to save enough to splash out when you are older a small nest egg can make the difference between ocassional treats or no treats at all.
Finally, the ostrich is not very clever but is an incredibly fast runner with a powerful kick. Those skills mean if it survives to maturity it has a long lifespan – potentially up to 60 years. You may not feel financially clever but planning today will all help you to have the money to enjoy your later years, however long you live, to the full.