Retirement planning made easy
Retirement planning made easy

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

Free course

Retirement planning made easy

1 Taking stock of your retirement plans

You are going to start by looking at how to take stock of your money and budget as you approach retirement.

The first step in retirement planning is to work out how much money you will need to cover what you expect to be spending. So, as Emma Byron of Legal & General explains, you need to have a close look at your household finances and be realistic about your spending.

Download this video clip.Video player: Video 1
Skip transcript: Video 1

Transcript: Video 1

[MUSIC PLAYING]

I think there's really three steps that people should be thinking about. First of all, start with the fun part, think about how you're going to be spending your money. And I think it's really, really important to be honest and realistic with yourself. Quite often people will just focus on the essential spend, and that's not really going to give them the retirement they want.

So perhaps think about cutting it down into two parts, what's your essential spend and then what's all the nice to haves. And with your essential spend, you really want to secure that with an income that's going to last for your whole lifetime. So that might be the state pension. It might be a final salary pension. Or it could be an annuity. But make sure you know you're going to be able to cover that for as long as you live.

And then you can use some of your other investments to think about the nicer stuff, the holidays, et cetera and how you want to dip into those. It's also really important, I think, at the start when you're looking at how much, you need to consider any debt that you have. Using your 25% tax free cash that you can take from your pension can be a really good way to pay off that debt as you head into retirement.

The second step is then to work out how you're going to fund all of that fund you hopefully are going to have for retirement. So starting off, the state pension most people would have earned a state pension through their working life, if they've been making their national insurance contributions. So you go to gov.uk and check how much state pension you're owed and when you'll be able to start taking that.

Secondly, you should have, hopefully, have some pensions from your working career, either personal pensions or workplace pensions. So it's worth thinking about all of the different places that you've worked and making sure that you know exactly how much you owed in all of your different pension pots.

And then finally, you need to think about any other investments that you have. So you might have cash ISAs and other forms of savings. Or your property might be an investment. And those things could all be used to fund your retirement.

So you've got your spending, you know what assets you've got, how are you going to fund your time, and you need to match those up. So as I said earlier, how are you going to fund your essential spend? Perhaps that's with you state pension and then maybe you're going to use some of your other investments for the nicer to have things.

[MUSIC PLAYING]

End transcript: Video 1
Video 1
Interactive feature not available in single page view (see it in standard view).

You’ll start by looking at how your household spending is expected to change when you retire. Maybe your mortgage will be paid off? Or you won’t need two cars, or to pay for travel to work? Maybe you won’t need a car at all, and you will get free or cheaper travel due to your age? Are you planning to move to a smaller house or a cheaper area? Will you need to spend so much on clothes, lunch or other things for work?

Look in detail at what you spend now and think about what you will be doing when you retire. The next part of the course will help you do this.

LG_1

Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to university level study, find out more about the types of qualifications we offer, including our entry level Access courses and Certificates.

Not ready for University study then browse over 900 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus