25th September 2014
Chase de Vere certified financial planner Patrick Connolly outlines what you need to be doing – and when – in order to secure a comfortable and prosperous retirement…
Most peoples’ financial planning priorities change as they get older, as does their need for financial advice. Many people in their 20s will be focused on paying off debts and other short-term objectives such as cash savings.
They might be planning to buy a house and maybe get married and have children. Earnings are likely to be relatively low as people are setting off in their careers. But people should also be making a conscious effort to start longer-term savings. This should include joining a company pension scheme. It may be they cannot afford to make large contributions but it is important to get started. The days when people can rely on the state or their employer to look after them as they get older are largely gone. Overall however financial advice needs overall at this stage are likely to quite basic.
In your 30s
Typically those in their 30s are focused on buying a house and maybe getting married and starting a family. Financial situations will change after children are born as costs increase and earnings may go down especially if one partner reduces their hours or stops working. Hopefully people will have built up cash savings to cater for this and any short-term requirements or emergencies. If having children, people should look at protection needs, particularly life assurance, so there are funds available to support children if one or more of the parents dies prematurely. However, long-term objectives must not be forgotten and people should be reviewing their pensions and also investing in ISAs. Financial advice priorities are likely to include family protection and mortgage advice.
In your 40s
Many people in their 40s will have higher earnings and this gives scope to increase contributions to longer-term financial planning. It is increasingly important for people to review how much they are saving for retirement. However, short-term priorities could be expensive. Mortgage costs may be high, particularly if interest rates rise, and there may be additional costs such as supporting children through school or university. Financial advice priorities are likely to include planning for retirement and maybe school fees planning.
In your 50s
When people reach their 50s, they are most likely to be at or approaching their maximum earnings. This is also the time when expenditure may be reducing with children, even if they are still living at home, likely to be costing less and hopefully earning for themselves. Mortgage costs could also be reducing. Financial advice priorities should be on saving for retirement by maximising pension and ISA investments where-ever possible. They should have a good idea when they are likely to retire and how much they will have to retire on.
In your 60s
These days many people in their 60s are still working, other than those in final salary pensions with a retirement age of 60. This is a trend that will continue as people work later in life. Costs should have reduced further with children grown up and mortgages hopefully paid off. Financial advice priorities are likely to be on retirement planning. Pension benefits need to be taken to generate an income in retirement. The increased flexibility and complexities around pensions mean that more people will need to take independent financial advice.
Your 70s and beyond…
Many people in their 70s and older are focused on generating income to provide a comfortable standard of living. With increasing longevity many can expect to live long beyond their 70s and so it’s important to plan with this in mind. Having catered for their own financial needs many people will be looking at estate planning and how they can leave assets to future generations. Financial advice priorities are likely to include generating income, inheritance tax and long term care planning.