Born in 1964: When can I retire?

If you were born in 1964 you will be at the age when you are starting to think carefully about your retirement plans. As with every major decision in life, it’s a good idea to carefully weight up the pros and cons of retirement before taking the plunge. This article will provide some helpful tips of what you need consider for retirement if you were born in 1964.

Born in 1964: How early should I start saving?

Being able to retire in our 50s requires a lot of financial planning earlier on in our career. Saving for retirement from an early age means that your money will have more potential to grow in value and benefit from compound growth.

According to the Retirement Living Standards, a single person will need £10,900 a year to achieve the minimum living standard, £20,800 a year for moderate, and £33,600 a year for comfortable. For couples it is £16,700, 30,600 and £49,700.[i]

Defaults such as employer auto-enrolment have certainly helped increase pension savings, but individuals need to go further and look at making use of their annual allowances, increasing their personal contributions whenever their salary increases, along with ad-hoc contributions when their personal circumstances change such as workplace bonuses, inheritance windfall and children leaving home, for example. All these things will allow for greater contributions when saving for retirement.

A generation living for longer

Average life expectancy in the UK has risen significantly over the last two centuries. According to the National Statistics, life expectancy at birth in the UK in 2020 was 79.0 years for males and 82.9 years for females.

With the disappearance of defined benefit pensions, and new legislative changes around social care, individuals rather than governments need to take ownership in securing their financial future.

We need to act now if we want to go into retirement and later life with financial security, wellbeing and be able to make the choices we want.

What is a good pension pot if born in 1964?

If you were born in 1964, you will be age 59 in 2023. If you want to retire at this age, you will need more than £61,897 as you will have more years in retirement. Therefore, a good pension pot at 59 should be at least triple the amount. To achieve this, you need to save as hard as you can while working. Also, the more you save, the more chance you have of achieving your lifestyle choices to see you through retirement.

Many pension experts recommend the 50/70 rule, which would aim to help you save enough to have a pension income that equals 50% to 70% of your salary. For example, let’s say you were on an average salary of £45,000. Research from the Department for Work and Pensions (DWP)[ii] suggests that you’d need to contribute 60% of your salary to earn a decent retirement income.

Make use of tax reliefs on pension savings

The governments tax reliefs on pension savings have now increased for 2023/24, allowing individuals to take advantage of tax-saving benefits.

In the 2023 Spring Budget, the Chancellor announced the abolition of the Lifetime Allowance, and raised the limit of the Annual Allowance from £40,000 to £60,000 per annum. This means you can save up to £60,000 per year into a pension (or 100% of your UK Relevant Earnings, whichever is lowest) and receive tax relief on your contributions.

Any unused Annual Allowance can also be carried forward for three years and used in addition to your current year Annual Allowance limit, enabling you to increase your maximum tax-relieved pension contributions for the current year.

Withdrawing from your pension from age 55

Since April 2015, the government introduced Pension Freedoms, allowing people aged 55 years and over (rising to 57 in 2028) to have more freedom and more choice accessing their pension savings. You can now take up to 25% tax-free lump sum from your defined contribution pension pot, from the age of 55. You also have the option to take out more than the 25% of your pot, but this would incur income tax and could even take you into a higher income tax bracket. Please take advice if you are considering this.

Things to consider in later life and retirement

There are other aspects to consider for those born in 1964 other than how much we will need financially during retirement.  These include:

Housing costs: Housing and mortgages makes up one of our largest monthly outgoings, this may not change in retirement. Many consider housing assets as a key source of income or equity in later life, but it is important to consider how you will be able to maintain housing assets once you stop working. Downsizing may not necessarily be an option, and often the costs of running a household does not change when we retire, even without a mortgage to cover.

Health and social care: While many are living longer lives than previous generations, not all of those years are lived in good health. Even with the government helping to fund social care in our latter years, there comes many drawbacks and ‘small print’ that makes funding for social care not as straightforward and cost-effective as people may think.

Lack of intergenerational support: Most families are geographically dispersed and unable to support their parents and provide the care they need during their later years. This needs to be taken into account as your savings may be needed to provide the right level of care.

Next steps

Planning for your retirement can seem quite complex and even a bit overwhelming, but a robust financial plan and budgeting is the key to success.  Whether you are planning to retire now, or starting to think about plans, we can help you to make the most of your pension and other investments and aim to achieve the retirement you want.

Speak to one of our team today for a friendly, no-obligation conversation about your plans for retirement.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise.  You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time Tax relief is dependent on individual circumstances.

SJP Approved 05/05/2023

[i] Retirement Living Standards, Pensions and Lifetime Savings Association, 2021

[ii] https://www.gov.uk/government/publications/planning-and-preparing-for-later-life/planning-and-preparing-for-later-life, 2020/21 survey