In the articles this year I have been looking at the retirement scene in the future and as you will have gathered I think that the golden age has come and gone and that in future we will all work a lot longer and retirement will be a period when we cannot work because of illness. However, if we plan correctly our working lives can be more interesting and varied and we can incorporate travel and sabbaticals along the way. So, how do I propose this should be funded?

The first thing is that we have to have a change of thinking? We must think that we are now saving to enjoy ourselves now rather than in the distant future. My definition of “Now” is not this exact minute but rather the next 5 or 10 years. So, we should be building up life plans for where we want to be in five years, 10 years and 15 years’ time and then designing financial plans around these ambitions.

How we do this is very simple, from the first day you start work you save 10% of your pay. Now, I hear you say that you cannot do this, well you can. Your approach should be as follows. When you apply for a job you consider the salary and you reduce it by 10%, then you ask yourself” can I live on that salary?” if the answer is “no” then you need to look for a better paid job. I suspect the answer is “yes” if you consider some budget cuts.

Now, you have 10% of salary to save every single month of your working life. You now need a financial plan but you do not need to spend thousands of pounds at this stage. A simple financial plan will look like this. You should save every month as follows, even when you withdraw money from a section you keep saving so it is replenished. Do not be tempted to change the split. If you have to make an investment decision you simply want to choose an index tracker fund – most probably a FTSE All share will be perfectly sufficient at this stage.

Fund Percentage Type Access
Emergency fund 

A “Now” fund

3.33% Regular savings plan with a Building society Easy access
A savings fund for your next adventure – think 5 years 3.33% Regular savings into a cash or stocks and shares ISA Access but only use for your next project
Pension plan – join a scheme (discussed in a later article) 3.33% Regular savings with tax relief from the Government A fund of money which can be used from age 55 onwards


Now you have a financial plan for life. In the next few articles we will look at how life may change the plan