Marc Shoffman is an award-winning freelance journalist who specializes in business, personal finance, and property. His work has appeared in publications like FT Business, The Times, and the Mail on Sunday. He also co-presents the “In For A Penny” financial planning podcast.
Retirement costs are rising, and it is crucial to plan for your golden years. Here, we look at what steps to take if you are 10 years away from retirement, as having a financial strategy in place becomes increasingly important as you approach this milestone. Recent data from the Pensions and Lifetime Savings Association shows that a comfortable retirement for a single person now costs £43,900 per year.
This figure has increased by £800 compared to last year. For those aiming to achieve this retirement income, Fidelity International suggests that a pension pot of around £700,000 at age 65 is required, which translates to a gross annual income of £52,000. Depending on your current age, the monthly savings required to achieve this goal will vary significantly:
– Starting at age 25: £459 per month.
– Starting at age 35: £841 per month. – Starting at age 45: £1,703 per month. – Starting at age 55: £4,508 per month.
The current state pension provides £11,973 per year, which will cover some of your expenses. It is essential to check your state pension forecast and identify any gaps in your National Insurance record that you can fill. Note that the state pension age is rising from 66 to 67 in 2026, potentially affecting when you can start drawing your pension.
The ten-year mark before retirement is a good time to consolidate your pension pots and maximize your contributions.
Planning for rising retirement costs
This period often coincides with peak earning years, allowing you to make the most of your pension allowances.
Consolidating older pensions can also help reduce fees. According to Ross Lacey, director at Fairview Financial Planning, tracking current expenditure and projecting future costs is crucial. This helps you understand how much you need your pensions, investments, and cash to be worth to ensure a viable retirement plan.
Ed Monk from Fidelity International advises not to de-risk too early. However, it is important to start shifting the balance of your investments as you approach retirement to ensure some level of security. Five years before retirement is a good time to plan how you will access your funds and whether you can maintain your desired lifestyle.
Philly Ponniah, a chartered wealth manager at Philly Financial, suggests that while you should reduce risk slightly, maintaining enough growth assets to stay ahead of inflation is also important. As you near retirement, deciding how and when to draw from different pots and securing essential expenses with guaranteed income is crucial. A pension may be just one part of your retirement funding.
Other avenues to consider include property investments. Kundan Bhaduri from The Kushman Group suggests stress-testing your property portfolio to ensure it can still deliver net income if interest rates remain high or if tenant demand decreases. Reducing debt on properties you plan to hold is a prudent approach.
Additionally, considering options such as annual gifting allowances, setting up trusts, and planning for care costs can further secure your financial future. Planning for retirement can be daunting, but taking thoughtful, proactive steps can ensure a comfortable and secure future. Start by understanding your current financial situation, setting realistic goals, and adjusting your savings and investment strategies as needed.
