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What’s your retirement confidence level?

Charles Stanley recently polled the general public on six important retirement topics. The (fairly) good news is two thirds of those asked are confident about facing retirement, and 60% were confident in their retirement plans. But more than two-thirds (39%) don’t actually know how much they’ll need to retire on.

By Russell Miles Senior Personal Finance Commentator

28 August 2024 | 14 min read

As part of our Money Milestones campaign, we wanted to understand how people were feeling about their retirements and how confident they were in achieving the rewards for a life of hard work

This is the first of a series of informal touchpoints and the data sizes are quite small. But it helps us get a feel for where people generally are in their retirement journey.

So firstly, let’s look at the retirement confidence survey findings.

What’s your retirement confidence level?

When asked about their general level of confidence in retirement, less than a quarter (23%) said they were fully confident but just as many were not very confident. A further 41% said they were somewhat confident and 14% haven’t started their retirement planning.

Source: LinkedIn poll conducted on 17^th June 2024; 111[RM1] [RM2] [SP3] [RM4] respondents.

Someone commented: “I’m confident that I’ll retire (if I live that long), [I] am confident in my retirement planning to date, although [I] am unsure to what extent I’ll be confident when retired.”

And that’s an important point to consider. As our lives change, our standards of living change, and our expectations of what we want from retirement can change. The plans we put in place early on in our career might not reflect where we are today or where we might be in the future.

We should all regularly review our retirement savings strategy to make sure the retirement we want is in reach.

Read more: How to set retirement goals

Do you know how much you need for your dream retirement?

We can only be confident in our retirement planning if we know how much retirement is likely to cost. After all, how do you know if you are close to achieving your target if you don’t know what that target is?

Just under a quarter of those asked (23%) not only knew how much retirement would cost but believed they were on track to achieving it. Just over a quarter (28%) knew how much they needed to save but didn’t think they were on track. Worryingly almost four in ten people (39%) did not know how much retirement is likely to cost them.

Source: LinkedIn poll conducted on 18^th April 2024; 99 respondents.

Each year the Pensions and Lifetime Savings Association produces the Retirement Living Standards Report in association with Loughborough University. The report estimated that in 2024 retirement costs are as follows:

A very basic retirement will cost £14.400 for a person living on their own or £22,400 for a couple
A moderate retirement will cost £31,300 for a single person, or £43,100 for a couple
A comfortable retirement will cost a single person £43,100, and a couple £59,000

With the New State Pension providing an annual income of £11,502, only a married couple who both qualify in full would be able to achieve a basic retirement from that alone. Everyone else will experience a shortfall in their spending. Given most of us will be retired for about 20 years from the State Pension Age, a simple calculation brings us to the conclusion that someone living alone will need to have saved about £58,000 for a basic lifestyle. A married couple wanting a comfortable lifestyle will need to have saved around £720,000 but would need more if they wanted to take an early retirement.

How confident are you in your retirement plan?

Feeling confident about the thought of retiring is not the same as being confident that you’ve done all you can to get the rewards you deserve after a life of hard work. This is particularly true for those who haven’t thought about how much they might need to support the lifestyle they’d like.

Confidence in retirement planning was broadly in line with confidence in retirement. About a fifth were very confident (18%), two fifths (42%) were somewhat confident, and a quarter (25%) were not so confident. A seventh of those surveyed (15%) claim to not have a plan at all.

Source: LinkedIn poll conducted on 3^rd July 2024; 107 respondents.

Whilst the number without a plan is in line with the number who said they haven’t started planning for retirement, this doesn’t necessarily mean they don’t have savings and investments. You can be enrolled in a company scheme and saving towards retirement without making an active decision.

With increases in the State Pension Age and doubts about the continuing viability of the State Pension, more and more of us will have to rely on our own actions to make sure we can afford the retirement we’re looking forward to.

What’s your retirement priority?

Not surprisingly, the vast majority of people (78%) said their top priority in retirement was maintaining their lifestyle. This was way ahead of the second priority of maximising returns (17%). Hitting savings targets (3%) and estate planning (1%) were way behind.

Source: LinkedIn poll conducted on 20^th June 2024; 120 respondents.

We have already seen how much we need to save if we want to live a particular lifestyle in retirement. But once you retire, maximising returns might not be the best policy. Aiming for the highest returns possible generally means accepting higher levels of risk in the hopes of achieving them.

Whilst it’s a good idea to remain invested to protect your wealth from the effects of inflation, taking too much risk can work against you. Higher risk investments can experience more extreme and more frequent falls in value. Continuing to take income from investments during periods of negative market returns can mean your wealth drains away much faster, making it very for it to recover. In extreme circumstances it may never recover.

How do you plan to fund your retirement?

It came as no surprise that pensions were by far the most common choice when saving towards our third age. But, surprisingly, it’s less than two thirds of those polled (62%). Other investments and “Other” came a distant joint second at about one in eight (14%); then savings at 10%.

Source: LinkedIn poll conducted on 25^th June 2024; 58 respondents.

Pensions are by far the most tax efficient way of saving towards retirement. You benefit from tax allowances when you pay in, and all returns are free of tax within the account. When it comes to taking your pension, most schemes allow you to take up to 25% of your savings pot as tax-free cash with all following withdrawals taxed in line with your other income under current rules. Or you can opt to leave the 25% invested and every time you withdraw the first 25% is tax free.

If you’re the member of an employer’s scheme, your company will also contribute towards your retirement pot. If you can afford to, speak to your employer about making additional contributions. Some employers will match these up to a limit. That’s free money.

However, you can’t touch the money until you reach the age of 55 (rising to 57 by 2028).

Luckily, there are other ways to be tax efficient. Individual Savings Accounts are funded out of your taxed income but like a pension pot all returns are free from capital gains and income taxes. And when you want to take the money out everything is tax free, which can be used to create tax-free “income” in retirement. You can also access the money at any time, so they offer more flexibility.

Cash savings are not the best way to save for retirement. Returns on cash are generally very low, and whilst your capital is not at risk, failing to keep pace with the effects of rising prices means its effective value – the amount of things it can buy – will tend to decrease over time.

What is your biggest retirement concern?

Over half of those who responded (51%) said their biggest fear in retirement is outliving their savings with just over a quarter (26%) saying inflation was their main worry. Long-term care was close behind (16%) while estate planning was a concern for 7% of those who answered.

Source: LinkedIn poll conducted on 28^th June 2024; 87 respondents.

Longevity is one of the great unknowns in life. The Office for National Statistics has a longevity calculator that can help you understand the average life expectancy of a generally healthy person of your age and gender. This can be a great help in understanding how long your retirement savings are going to have to last.

But we mustn’t forget about the effects of inflation. You need to make sure that the income you take from your pensions and savings rises in line with increases in the cost of living. However, don’t be fooled by the official numbers which represent the average cost of living for an average household. People spend money in different ways, and this affects your personal inflation rate. Indeed, the PLSA figures for the end of 2023 are about a third higher than the previous year. Understanding our personal inflation rates can give us a better understanding of future spending plans and income needs.

With increasing age come greater fears for our health and the prospect of having to pay for long-term care in our later years. To put it into perspective, about 5.2% of over 65s were receiving long-term care in 2022/23 according to The King’s Fund. By the time we reach 85, about 86% of us will have at least one long-term health issue, and just over half of people in long-term care are over this age.

At what age do you plan to retire?

An early retirement is a perennial dream and, in our survey, the vast majority of people say they plan giving up work before the State Retirement Age. About one fifth plan to retire before they reach the age of 50 (19%), a further 38% by the age of 60 and about a third (32%) by the age of 70. About one eighth of those asked (12%) plan postponing retirement until their seventies.

Source: LinkedIn poll conducted on 16^th July 2024; 469 respondents.

Although retiring early is a nice idea, you have to make sure you’re in a position to support yourself financially between the day you retire and when you can claim the State Pension. A survey we ran last year showed there is some confusion about when you can claim the State Pension and how you qualify. And this may still play a part in the more recent survey results: an expectation that you can claim the state pension before the age of 67.

If you want to retire at 50, for example, you will have to fund yourself for 18 years. Realistically, that’s almost as long as you’ll be retired with the state pension and means having to save significant sums.

Even if you could take your company or private pensions from the age of 55, you will still have to generate enough income to support yourself fully through the next 12 years.

Look out for further polls on our social media accounts.

If you have questions about retirement and how to retire with confidence, and want to speak to someone, we offer a 15-minute free coaching session with a financial planner who could help point you in the right direction.

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The tax treatment of pensions depends on individual circumstances and is subject to change in future.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

What’s your retirement confidence level?

By Russell Miles Senior Personal Finance Commentator