How to plan for an unexpected retirement

Social distancing measures brought about by the coronavirus pandemic has made it difficult to make plans even a week in advance. Even as we enter into December, it is nearly impossible to make any firm social commitments ahead of the new year.

However, COVID-19 has not just taken a toll on social plans. The pandemic and subsequent recession have inevitably impacted people’s job security, and consequently, their financial situation.

Understandably, this has led many people to focus on their short-term financial strategies, ensuring that they have enough in the bank to withstand potential upheavals to their employment situation.

So, for many people, building a financial buffer will likely take precedence as far as planning for the future is concerned. Particularly in the wake of the recession, many personal finance experts recommend starting an emergency fund consisting of at least three months’ worth of one’s salary. This should ensure that, if faced with redundancy, individuals have some money to survive on whilst they look for another job.

Of course, this is sound advice; but what about those who are unlikely to seek re-employment?

Indeed, a three-month financial buffer is unlikely to be enough to last throughout retirement…

Unexpected retirement

COVID-19 and the subsequent onset of a recession has upended many people’s retirement plans. In a recent survey of over 900 UK adults aged 40 and over, My Pension Expert discovered that almost one in ten (9%) of respondents aged 40 to 67 were forced to take early retirement as a direct consequence of the pandemic.

The prospect of regular monthly income drying up is daunting in itself. However, this situation could be even worse for those who are unlikely to take on another job, despite not having saved as much into their pension pot as they intended. 

The majority of workers will have been saving into a workplace pension scheme (or schemes) throughout their career, and it is likely that many older workers will have some retirement funds saved. However, if they were originally planning to retire later in life, they may not have been able to save adequate funds to sustain a comfortable lifestyle.

To complicate matters further, many older workers lack a clear retirement plan. A further look into My Pension Expert’s aforementioned research reveals that two fifths (42%) of adults aged between 40 and 67 have no clear strategy for retirement in place.

Luckily, action can still be taken to improve one’s retirement prospects.

Is it too late to plan for retirement?

Although the later retirement planning is left, the more assistance will be needed, it is never too late to develop a strategy.

The key is not to panic, as this can lead to savers rushing into ill-informed financial decisions, which could leave them out of pocket in the long-term.

Instead of going it alone, those concerned about their lack of retirement plan should seek independent financial advice. Advisers are able to review an individual’s financial situation and offer methods in which they can make their retirement savings work harder. From alternative investment options and flexible drawdowns to annuities, there are retirement finance options to suit everyone’s individual needs.

Of course, the earlier savers develop a retirement strategy, the better – even if it must be amended to adapt to changing circumstances at a later date. However, those who have left retirement planning until later in life need not panic. Instead, I would urge adults to seek independent financial advice in order to develop a sustainable retirement savings strategy. Doing so will allow individuals to look to the future with confidence.