Will you pay for your ignorance in retirement?

Any police officer will tell you that ignorance of the law is no defence.

Any Financial Planner will tell you ignorance of pensions will cost you dearly in retirement.

I have read a statistic from a YouGov poll commissioned by Axa Wealth that 71% of people aged over 55 expect that the State Pension will play a significant part in their retirement planning.

So (assuming that the poll was statistically relevant) 71% of people in the UK approaching retirement expect to be able to live on £140 a week!

God help them.

After Council Tax, utility bills, petrol, weekly food bills  and other non discretionary essential expenses I can’t see much change from £140 so any kind of retirement lifestyle will be far from enjoyable.

With such an overwhelming majority this can’t be limited to the low income earning bracket who can’t afford to plan for their retirement,  it must include a large number of those who could afford to plan for the future but don’t because they are a) ignorant to what they are facing b) don’t trust the ‘system’ or c) prefer to spend now.

Our monthly income has two purposes; to cover the cost of today’s lifestyle and to cover the cost of our future lifestyle.

If you tilt the scales to greatly towards today’s lifestyle you are going to be facing a very significant downgrade to the life you live when you stop working.

Fortunately the enforced auto enrolment into workplace pensions that is currently being rolled out nationwide will help provide more personal income in retirement but assuming that this will be enough is naive.

If you wish to maintain the standard of living in retirement that you currently enjoy you must take an active role in your own long term planning.

This should include understanding what your current financial position looks like, working out what the annual cost of your desired retirement lifestyle will be and working out how you can plug any gaps between what you require and what you are likely to get assuming you do nothing.

The sooner you do this the better. After 55 is not too late but it will be much harder to accrue sufficient wealth to live off in retirement.

It may be that you fit into the category that doesn’t trust the ‘system’. To these people I say don’t cut your nose off to spite your face. At least do something.

The alternative is to keep working beyond the State Pension age but who really wants to do that?

Photo credit