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Your Retirement Salary

How to Use Your Lifetime of Pension Savings to Pay Yourself an Income in Your Retirement

By Richard Dyson and Richard Evans
13-minute read
Audio available
Your Retirement Salary: How to Use Your Lifetime of Pension Savings to Pay Yourself an Income in Your Retirement  by Richard Dyson and Richard Evans

Your Retirement Salary (2019) tackles a knotty question asked by savers approaching retirement age: How do you transform your savings into an income that will see you through your sunset years? Drawing on years of experience addressing readers’ personal finance questions for a leading British newspaper, Richard Dyson and Richard Evans provide a wealth of insights into getting the most out of your pension pot. 

  • Retirees or pensioners
  • Savers with an eye on the future 
  • Finance fanatics

Richard Dyson is a prize-winning financial journalist and a regular contributor to both specialist and non-specialist titles including the Express, the Mail on Sunday, Investors Chronicle and the Daily Telegraph. Dyson was also the Head of Personal Finance at the Telegraph Media Group. 

Richard Evans is one of Britain’s best-known financial commentators, savings experts and investment analysts. His knowledge of the industry is the fruit of years of research and hundreds of one-on-one interviews with the UK’s top fund managers and professional investors.

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Your Retirement Salary

How to Use Your Lifetime of Pension Savings to Pay Yourself an Income in Your Retirement

By Richard Dyson and Richard Evans
  • Read in 13 minutes
  • Audio & text available
  • Contains 8 key ideas
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Your Retirement Salary: How to Use Your Lifetime of Pension Savings to Pay Yourself an Income in Your Retirement  by Richard Dyson and Richard Evans
Synopsis

Your Retirement Salary (2019) tackles a knotty question asked by savers approaching retirement age: How do you transform your savings into an income that will see you through your sunset years? Drawing on years of experience addressing readers’ personal finance questions for a leading British newspaper, Richard Dyson and Richard Evans provide a wealth of insights into getting the most out of your pension pot. 

Key idea 1 of 8

Pensions mean different things to different people and different generations. 

What is a pension? Well, there are a couple of definitions. 

The first is simple: a pension is the money you live on once you have retired. A retiree might, for example, say something like, “I can just about get by on my weekly $300 pension.”

The second is that its a sum of money or an investment portfolio earmarked for retirement. This is also called a pension pot

That’s basically everything you have accumulated over the course of your working life. It can include savings from your salary, investments, and contributions from your employer. A pension pot isn’t the same as an income – it’s a pool of money put aside during your working life that you will need, somehow, to turn into an income when you retire. 

Older generations also have their own understanding of pensions. If you worked for a big company in the 1960s, 1970s or 1980s, you’ll probably be familiar with the concept of a “gold-watch retirement.” This refers to the custom of giving long-standing employees a golden watch on their last day of work to thank them for their service. 

This went hand-in-hand with a more paternalistic style of employment. When workers came to the end of their careers, they collected their watch, went home and put their feet up. A good part of what they had earned in wages in one month became their pension in the next. This was known as a defined benefit or final salary pension

Say you worked for 25 years with the same company and were earning $67,000 a year when you retired. Companies “defined” your pension by multiplying a percentage of your final salary by the number of years served. Typically, that might be 2.5 percent. Multiply that by 25 and you get a pension of $41,875 a year.

This type of pension secured a comfortable retirement for millions of people in countries like the UK and the US. Some retirees in their seventies and eighties are still reaping the rewards of this generous arrangement today. It’s a very different picture for their children, however, let alone their grandchildren. Why? Let’s find out. 

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