Long-term financial planning for all seasons

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HSBC's The Future of Retirement The power of planning report found that 41% of people are under-prepared to deal with life's financial challenges, but the good news is that it's never too late to develop a financial plan. Getting started is important and it's better to have a good plan today than a perfect one tomorrow.

Your plan should be robust enough to deal with unexpected issues and events as well as being unique to you, because everyone's aspirations are different. Some people focus on their children's future, for example, while others are concerned about their life in retirement.

Many people, however, give little thought to financial planning. Although they may have a company pension, they don't know what it will provide or whether it will be enough. A good rule of thumb is to contribute a percentage of annual earnings equal to half your age into retirement funds – this could be any plan, fund, or scheme that provides retirement income. However, you also need to take into account the value of existing pension funds and the income you require in retirement.

Protecting your family

While many people have some life cover to protect their loved ones, they are often ignorant of the appropriate level that is generally needed to protect a family and their lifestyle. A simple calculation is likely to demonstrate a need for cover of 7-10 times your salary in order to provide a replacement income for the family. Mortgage protection is obviously a high priority, but it's wise to consider the broader picture – as many people haven't prepared for the possibility of illness or redundancy that could seriously affect their long-term savings.

Garry Crooks, a Senior Financial Planning Manager at HSBC, says: "Life is a journey and there are many obstacles that can come your way, whether it's losing your job, ill health or even the death of a spouse. It's better to plan for those events so that when life throws you a surprise, you can be better prepared financially.

"As parents, people often want to help their children and provide support through, say, university or when their child buys a first home. They may prioritise their children and forget their own needs until it's too late. With people living longer these days caring for elderly parents is another factor that may need to be considered.

Getting advice

"Many think that their company pension will be enough for retirement or that state provision will be sufficient. They need to look more closely at their goals. A lot of people will pay off their mortgage first and then start looking at retirement but by then it could be too late.“

"Financial planning involves thinking about your future dreams as well as taking care of yourself and your loved ones," adds Product Manager Matt Wilder. "When you reach retirement, for example, you'll probably want to do some of the things you always wanted to treat your relatives, including your grandchildren.”

He concludes: "Large numbers of people are under-prepared and are putting it off until tomorrow. Finding information on financial planning is as simple as going online."

Please be aware that the value of investments, including those within pensions, and any income from them, can go down as well as up. This means you may get back less than you originally invested. Please also be aware that the value of tax benefits will depend on your individual circumstances, and tax rules may change in the future. You can normally only access money that you put in to a pension when you take your retirement benefits.

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Everyone's circumstances are different and what applies to one person may not be right for someone else. The suggestions above are based on a general assumption of each circumstance and they are not intended to provide advice or recommendation.