Why Your Pension Is Not Enough for Retirement
Nobody wants to retire on meager funds, but is the prospect to be financially healthy in retirement looking bright enough for everyone?
For many retirees, the answer may be “no” considering that there are still a number of aged employees continuing work in the company they have worked with for most of their lifetime. In a number of cases too, retirees live with their family because they could save more on house rental expenses this way than if they were to live separately from one another.
Actual numbers from field studies say that in the UK, more than 6 million middle-class workers are not saving enough for their retirement. There’s also research from Aegon Center for Longevity and Retirement that one in seven people nearing retirement doesn’t have a pension program in place.
These things can indicate only one thing: elderly citizens, especially those who were unable to save or invest in their prime years might not have enough in their pension money to see them through retirement.
Here’s why you need to be responsible for your own retirement:
1. You have diminished income sources
In your professional career, you were earning money from your basic income, allowances, and other work benefits.
Come retirement, though, your only financial source will be your monthly pension. The amount of which is computed based on the number of years of service credited to you and the number of minor-aged children who are dependent on you until they turn 21, at which time, allowances for them will no longer be included in your pension money.
Unless you were able to build a savings fund or have interest-generating investments, you’ll need to work out some income replacement mechanism through a business, consultancy work, or part-time online jobs.
2. Your retirement years could be longer than you expected
It goes without saying that you’d want to be physically healthy for your retirement, so you could still do things that you used to, try out new experiences since you have more time for social interactions, or pursue your hobbies and interests on your own.
Then again, that means for the next 20 years or so, you’ll mainly be tied to receiving a fixed amount of monthly pension unless the social security system increases your retirement benefits.
The million-dollar question is: Does your pension fund in its entirety have the ability to withstand long retirement?
3. Your cost of living expenses might increase in retirement
When you retire, you still have to fend for your everyday needs such as food and utilities – you have to be financially prepared. Your daily meals alone, from breakfast to lunch and dinner, could take up a lot of your budget.
Just try to compute how much money you’ll need for each meal for 10 or 20 years to represent the length of your retirement period. We bet you’ll be surprised by the numbers that you’ll be getting.
Aside from your regular expenses, you also have to account for emergency situations and other essentials like grocery, medicine, rent, and clothing. On top of these, there’s the danger of inflation where the rising prices of major goods and services could significantly reduce your power to spend for what you need.
Here’s one more concern worth looking into: Are you qualified or eligible to receive full pension benefits? In cases where there were gaps in your work history and you were unable to make contributions toward your pension fund, then you could have reduced coverage once your pension takes effect. That means your monthly allowance from your pension may suffer from considerable cutbacks.
Tips to Jumpstart Your Retirement Fund
It’s never too late to work on augmenting your retirement money by way of saving, investing, or exploring other money-making options. Use these tips as a guide:
Determine what you need for retirement. Everything starts from here – when you know the things you’ll have to spend later on, you can gauge how much you need to save to finance them.
Catch up on investing. Again, anytime is a good time to build on your financial capabilities. If you’re currently years away from retirement and have some assets that you can put to good use, you could start looking into which investments you should have by your 50s and work toward acquiring it.
Find other sources of income. Retirement age usually starts at 60, but others choose to retire some five years later as those extra years can keep them on the company payroll, as they could put those years’ worth of salary toward their savings.
Alternatively, you could downscale some of your expenses, like getting a smaller house outside of the city instead of staying in a high-end residential community in the metro.
Retirement is one of life’s most significant milestones to look forward to, and adequate foresight and planning can make a big difference in helping you enjoy it to the fullest.
Laura Lenox works as a life coach for Final Wishes Covered. She is passionate about helping individuals achieve the life they’ve dreamed of and being a catalyst for change. During her free time, she enjoys reading books, doing yoga, and spreading positivity in everything that she does.