Ask the expert: How can I fund my retirement years?
With longer life expectancies and a changing landscape of retirement planning, it’s normal to have some questions about how to fund your retirement years.
It’s important to consider what your goals are for retirement, is that maintaining your current lifestyle or ticking off long-haul destinations from your travel bucket list?
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From there, you can start to consider if your current financial plan can maintain this or how you could supplement your finances further.
To shed some light on this topic, we’ve consulted with Andrew Morris, Senior Equity Release Advisor at Age Partnership.
How much money do I need to retire?
“I’m finding that many people do not know how much they need to retire.
The government’s most recent data shows the average weekly income for pensioners in 2023 to be £387. This works out at around £20,124 per year.
There’s no set amount as it really depends on your lifestyle and expectations for your retirement years.
However, to get a good idea of what they need, I encourage my customers to list their fixed and variable outgoings.
Your heating, water, council tax and insurance bills are fixed, whereas variable costs are food, petrol and social expenses.
Once you’ve got an idea of how much you need to pay your bills and the variable costs to be able to maintain the lifestyle you would like, you can then consider if you want to include any extras in your financial plans, such as holidays or weekends away.”
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How can I supplement my retirement savings?
“For many people, one of their biggest monthly expenses is their mortgage repayments.
Many customers I speak with want to repay their existing mortgage so they can reduce their committed monthly income and have more disposable income in retirement.
One option to repay your mortgage if you’re a homeowner aged 55 and over, could be through releasing some of the equity tied up in your home, known as equity release.
With a lifetime mortgage, the most popular type of equity release plan, you continue to own 100% of your home.
Unlike a conventional mortgage, there are no required monthly repayments as the money you release, plus accrued interest, is repaid upon death or moving into long-term care.
Another way to supplement your retirement finances could be through downsizing to a smaller property and using the funds from the sale of your home to support your retirement finances.
Taking in a lodger could also provide you with an additional income.”
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Could equity release be right for me?
“It’s important you speak with an expert if you’re considering equity release as a way to raise retirement funds, and advice is required before proceeding with equity release.
To qualify, you must be a homeowner aged 55 and over and your property must be worth at least £70,000.
As long as any existing mortgage is first repaid, which is a condition of equity release, the money is then yours to enjoy. Whether that’s supplementing your daily finances, or enjoying a long-haul holiday.
Your advisor will consider your individual circumstances and talk you through everything you need to know, including the potential risks and impact it will have on your entitlement to means-tested benefits, now or in the future.
Equity release may involve either a home reversion plan or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care.
How much does it cost?
Through Age Partnership, initial advice is provided for free and without obligation.
Only if your case is completed will an advice fee of £1,895 be payable. Other lender and solicitor fees may apply.
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Age Partnership is a trading name of Age Partnership Limited, which is authorised and regulated by the Financial Conduct Authority. FCA registered number 425432. Company registered in England and Wales No. 5265969. VAT registration number 162 9355 92. Registered address, 2200 Century Way, Thorpe Park, Leeds, LS15 8ZB.