Something you don’t know about me: I don’t have a single tattoo. Sometimes it feels like I’m in the minority.
I don’t have anything against them or the people who have them, I just don’t think one would suit me. I once thought about it (a Native American chief a la Eric Cantona or, were it not for an unfortunate bike crash, maybe the Ironman logo) but that is as close as I have come.
For those who have them, I wonder how much time is spent considering their appearance when their skin isn’t as youthful, especially the more elaborate designs. Perhaps they simply don’t. Or can’t. Some people struggle to visualise their future version of themselves; their brains aren’t wired that way. They focus on the present without regard to the future. Their future selves are, in effect, no different to the stranger in the street.
While this may mean that in the next couple of decades there is a large cohort of people with wrinkly body art and a thriving economy for tattoo removals, the more serious implication of this myopia is a cohort of retirees without any degree of financial freedom or security. Not because they have spent all their money on adding (or removing) Celtic bands, football club crests or Chinese symbols from their body, but because they haven’t given thought to what their future selves may need when the monthly paycheck stops.
Planning for the future is going to be hard if your future self is a stranger, but it’s not going to be half as difficult as spending thirty or forty years of retirement trying to survive on the State pension. A State pension which is inevitably going to be reduced and delayed further as we all live longer.
The Baby Boomers Had It Easy
Current retirees, the baby boomer generation, have it easy: defined benefit pensions and the promise of a guaranteed, index-linked pension that they didn’t need to think about; a triple-lock State Pension and a boom in house prices that will provide a cash injection on an eventual downsize.
But what if you are working now and planning for your retirement?
The State pension is being pushed back further and further and the Triple Lock is an expensive promise that a Chancellor will have to break sooner or later regardless of the inevitable uproar.
House prices have, until recently, continued to rise but this is, in part, due to the availability of cheap borrowing and growing mortgage debt. A cause-and-effect cycle of cheap borrowing pushing up house prices requiring more debt to own a home.
So, what are your options?
Perhaps you are intending or expecting to work longer? That is fine if you enjoy what you do and don’t wish to stop. But what if you don’t, or can’t? What if your retirement date is out of your hands? It may be dictated to you by your health or your ability to continue to do your job. Maybe your spouse or partner has different plans.
Perhaps you’ll live on what you have and ‘cut your cloth accordingly’? But if you intend to rely on the State Pension (currently at a maximum of £10,600 a year), increases in the cost of living over a multi-decade retirement will make it an unenviable challenge. Even with the Triple Lock, real inflation is greater than the official CPI rate used to assess State pension increases.
The Only Way To Look After Your Future Self
Without the certainty of a defined benefit pension or being able to rely on the State to provide you with the retirement you desire after forty years of work, the only way to look after your future self is to take action yourself.
It will require some sacrifices today; you may have to forgo discretionary items now so you can put more into your pension (at least you will pay less tax as a bonus) but the future you will thank you for it.
I’m regularly asked how much is needed to retire. The short answer is, it depends. The greatest variable on how much anyone needs to retire is how much they will spend each year in retirement, and that is different for everyone. If you want to do some calculations on how much you need to save to make sure you have enough you can use this simple calculator.
Don’t Be A Stranger
If you are somewhere that is less future-oriented and struggles to visualise an older you, it may help to use one of those picture editing apps that ages a current image of yourself. The output may be a bit depressing but at least then you have someone you may be able to relate to better. That may then be the motivation you need to kick-start your retirement planning.
