Will your pension be “enough?” 5 questions to help you find out

Worrying that your pension won’t be sufficient to fund your retirement is one of the most common financial fears.

After years of hard work and saving, it’s only natural to want to have minimal worries when you finally leave the workplace. However, many people find it difficult to determine exactly what “enough” is for them.

While certain factors, such as your lifespan, are impossible to predict, there are other determinants you can plan for. The key is to ask yourself the right questions.

With that in mind, read on to discover five questions that can help you find out if your pension will be “enough” for your retirement.

1. When do you want to retire?

Choosing when you want to retire is crucial to determining whether your pension will be enough to support the lifestyle you want.

You may have always planned to retire as early as possible and leave the workplace at 60 or even earlier. Alternatively, you might enjoy the routine and purpose your work provides and intend to continue working well into your 70s. Or perhaps your goal is simply to retire at the State Pension Age.

Whatever your preference, defining it early and building your financial plans around your target retirement age can help ensure you are properly prepared.

Even a difference of just a few years can have a significant impact on your retirement outlook. Working for one additional year can boost your pension by tens of thousands of pounds, as you not only make additional contributions, but you also reduce the number of years you’ll draw from them.

Setting a target retirement date gives you a clear direction. Of course, your plans may change as your circumstances evolve, and there’s no way of knowing how long you’ll live after retirement, but having a rough goal that becomes more defined as you approach it can give a clearer idea of what will be enough for you.

2. How big is your partner’s pension?

If you plan to retire alongside your partner, it’s a good idea to consider your pensions together rather than in isolation. If your pension savings are of different sizes, you may choose to rely more heavily on one than the other for certain payments.

For example, you could use the bigger pension to cover larger shared expenses, such as travel, home improvements, or helping family members. Meanwhile, you could build a withdrawal strategy that utilises both pensions to provide a stable and tax-efficient income that ensures your combined savings last as long as possible.

By viewing your pensions as shared retirement resources, you can build a more flexible and efficient plan that supports both your lifestyles throughout retirement.

3. Do you have any dependants?

Another key factor when determining whether your pension will be sufficient is whether you have, or expect to have, any financial dependants.

This may include children who still live at home, grandchildren you plan to help financially, or other relatives and loved ones who rely on your support. Ongoing financial commitments can place additional demands on your retirement income, so it’s important that you factor them into your planning.

Considering these responsibilities early allows you to build a more realistic picture of your standing and helps ensure your retirement savings are structured to support both your own lifestyle and those who depend on you.

4. What do you plan to spend in retirement?

Creating a retirement budget is similar to budgeting at any other stage of life. A good starting point is to identify your essential expenses, such as utilities, food, insurance, and other regular outgoings that you will need to cover regardless of your lifestyle choices.

You should also factor in any outstanding debts, including mortgage repayments, loans, or credit card balances, as these will continue to affect you in retirement.

Next, consider your discretionary spending. In retirement, this may include larger costs such as travel, hobbies, or providing financial support to children or grandchildren.

While your expenses are likely to change over time due to lifestyle choices or external factors such as inflation, cashflow modelling can help you understand how sustainable your spending may be over the long term.

This can then give you an estimate of how much you are likely to spend in retirement based on your plans, lifestyle, and other economic factors.

5. Are there potential costs you haven’t planned for?

Alongside the costs you plan for, some potential expenses and risks may be harder to predict but could have a significant impact on your pension.

For example, rising inflation can gradually erode the spending power of your savings, while poor market performance may affect your investment growth. Later in life, you may also need to consider the potential cost of long-term care, which can be substantial.

Because these factors can significantly affect how long your pension lasts, it’s important to account for them when determining what “enough” looks like for you.

Building flexibility into your plan and regularly reviewing it can help ensure your retirement remains financially secure even as circumstances outside of your control change.

A financial planner can help you determine if your pension is sufficient for your retirement goals

A financial planner can work with you to turn your ideal retirement into clear targets and goals that help ensure the lifestyle you envisage becomes a reality.

By asking the key questions that underpin every successful retirement plan, they can help you understand how much you’ll need and what steps you should take now to achieve it.

A financial planner can also use cashflow modelling to project how factors outside your control, such as inflation, market performance, and life expectancy, could affect your income needs over time.

Taking all of these elements into account, they can help you determine what would be “enough” for your retirement, so you can build towards a goal that gives you long-term financial peace of mind.

To speak to a financial planner, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.