Retirement can be wonderful when accompanied by two essentials – much to live for and enough to live on. While the former is down to family, personal interests and health, the latter requires more careful planning, particularly as major political, social and economic changes are having a significant impact on retirement prospects.

Ageing demographics and rising national debts are sapping confidence in the ability of national retirement pensions around the world to sufficiently provide a minimum decent standard of living. On the other hand, as life expectancy continues to rise, and with it a gradual increase in retirement age, there is a general sense of expectation of a lifestyle above a minimum decent living standard when reaching retirement.

How well you live after retiring can depend on how well you plan for it at the right time. Even if it’s a long way off, think about what you want your money to do for you when you retire.

Most people do not realise their retirement will likely have two stages. Straight after finishing work, people tend to be busy, independent, more agile and in better health. Most think this active stage will be the longest phase of their retirement.

Indeed, for many, it may not be ‘retirement’ at all. A number of people will, in fact, continue working to some extent and others take advantage of the extra time to start a business or new venture, or support their family.

Later comes a second stage where some people may start to need assistance with day-to-day tasks such as physical activities and going abroad. This is when they are likely to incur the most cost.

Growing older can bring uncertainty for many. However, most working-age people feel hopeful about their retirement. They look forward to pursuing old and new hobbies and interests, having more freedom and opportunities, spending time with friends and family, and remaining healthy.

Despite the lack of certainty  and the common tendency to avoid planning because of it, when planned for appropriately, retirement can be one of the most relaxed and happy periods in our lives.

Practical steps to consider when planning for the retirement you want:

Reframe how you think about retirement

It’s easy to put off planning your retirement, so reframing how you view it is important. Think of it as a chance to pursue your passions and have new adventures.

Visualise the retirement you want

Think about the kind of retirement you want. Do you want to go travelling, move home, take up a new hobby or even start a new business? Having a broad idea of how you’d like your life in retirement to look, will allow you to plan for it more effectively.

Be realistic about your retirement

Make sure you are well prepared for a long and comfortable retirement. Factor potential healthcare costs into your retirement planning.

It’s never too early to start saving

The earlier you start saving, the less you will need to put in, in terms of a regular contribution. On the other hand, the later one starts saving, the higher the regular commitment required to arrive at a particular financial goal in less time. By investing early and staying invested, you are more likely to benefit from earning income also on any accumulated gains and from applicable tax incentives as may be announced from time to time by the government.

Consider the risk

Balance your ways of saving and investing for retirement to spread the risk along the life cycle and maximise the returns. One could consider higher risk and hence, better prospects for investment returns, the longer the time left to retirement. On the other hand, getting closer to retirement warrants rebalancing towards lower risk investments to preserve capital, albeit this also means lower potential of investment returns.

Plan for the unexpected

Unexpected events can have a major impact on retirement funding. Include worst case scenarios when planning your retirement and consider putting protection in place to help secure your retirement income.

Ask the experts

Nobody expects you to be an expert in saving and investments, so seek professional financial advice to help you plan and cost out your retirement plans with the help of retirement calculators. This will help you decide on the right approach. Don’t be afraid to ask questions ‒ get clarity before making decisions and understand flexibility until retirement.

From managing to planning

Managing your finances is not enough ‒ you need to plan where you can save money and how much. Identify the changes you can make today that will cut costs and then direct the savings to your future.

Muriel Rutland, CEO, HSBC Life Assurance (Malta) Ltd