For a rich retirement, save a LOT more

You don’t need me to tell you that the cost of living has gone up a lot in the last few years.

Our government’s appalling decision to lock us down and pretty much wipe out our economy for the best part of three years was always going to cause us major problems – as I said at the time and keep saying – and we are now seeing the bad effects of this decision. When you, even temporarily destroy a nation’s ability to produce properly and you cut off supply chains that help the flow of goods across the globe, there’s going to be a set of economic problems that can hang around for years.

So the fact that the cost of pretty much everything has gone up since the start of lockdowns is no big surprise. Cut production for a good long time and demand will put up prices.

What is something of a shock – thought not really a surprise – is the fact that the Pensions and Lifetime Savings Association (PLSA) has announced that, because of this horrible rise in prices, retirees are particularly badly affected. They say that if you want a retirement with even a moderate standard of living, you now have to have a LOT more money saved up than you did even in 2022.

Here are the retirement stats

• The cost of a minimum retirement living standard has increased from £12,800 to £14,400 for a single person and from £19,900 to £22,400 for a couple, according to data from the Pensions and Lifetime Savings Association.
• The cost of a moderate retirement living standard has increased from £23,300 to £31,300 for a single person and from £34,000 to £43,100 for a couple.
• For a comfortable retirement income, the cost of living has increased to £43,100 for one person and to £59,000 for a two-person household.

Don’t panic

Now of course, these are estimates by an organisation that doesn’t know you or your situation.

We are all different and each have different wants and needs. It’s quite possible that you could manage very nicely on a lot less than they are estimating.

It’s also highly possible, and likely, that you can find interesting and lucrative part-time work here and there to supplement your income in retirement and give yourself interesting things to do. I know many people who not only make a nice bit of cash by having the occasional side-earner but find that these activities really improve their life and give them more of a reason to get up in the mornings.

The amount you need will also depend on whether you have children and grandchildren that need support. Not all do, but the PLSA has estimated that an extra £1,000 a year will be needed by people with family members who need help. It you do have family members who have got used to being supported financially by you,  it may be time to have the tough conversation with them about what you can reasonably afford. Never a nice thing to do but this news from the PLSA could be a good way of introducing the topic.

How can you increase your retirement income?

If you’re still working and saving – save more! Easy to say, harder to do, I know. But, if you can, I would put more away than you are currently doing.

And make sure you’re putting it into products that are giving you a decent return. Even if you have less than ten years to go before you plan on retiring, it’s worth putting the bulk of your money into investment products –  stocks and shares ISAs, pensions that invest mostly in  equities rather than bonds, property and alternative investments such as Blend Network which is currently giving an average of 10% interest.

Also, if your main interest is to retire early and not carry on earning, think seriously about moving somewhere cheaper than you live now and to a smaller home. Downsize in every way and go for simple living in order that you need less of an income to survive.

Or, if you’d like the luxuries you’re currently enjoying when you retire, keep in mind ways to supplement your pension income. We have loads of ideas for retired people to make money on the side – most of them are actually interesting and rewarding too. Remember that most forms of work involve you meeting new people, getting out of the house here and there and gaining a sense of achievement. Work isn’t just about earning money.

If you’re single, or even in a couple, it’s also worth considering how you might get together with others to share costs and help each other have a richer retirement. If you have a single friend who you get on with you could move in together, maybe in a home that could be turned into two single units. Couples that are great friends could move near each other to support and share. The more we can share our spaces, our food, our transport, our care and so on, the less any of us will need to spend.

We need to set up new systems

Ultimately, though, it feels as though the current social, economic and political system is not working.

We have a continuing cost of living crisis that has become the new normal.

We have a birth collapse that means there could be far fewer workers in the near future to fund the new retirees.

We are looking at putting back the state pension age to at least 70 in order that it can be paid.

We live in a country that has lost its will to be productive and really just wants to sit back and be looked after.

In short, we have found ourselves in an impossible situation – a situation that cannot continue. We have to change the way the country is run and how we look after ourselves.

Do you have a view on how the economy should be fun? On how society should change in order to look after those that need it and encourage the able-bodied to work?

If so, put it in the comments below.

I will be discussing this and solutions that come to me in the months that follow so keep checking back!