THERE could hardly be a more daunting time to be considering retirement.

With the current financial turmoil, low annuity rates and changes to many pension schemes, getting the decisions right when you decide to stop work will not be easy.

You could therefore be forgiven if, faced with such a challenging environment, you want to put your head in the sand in the hope that better times will return soon.

This is an understandable response, but not the right one. In tough times it pays to formulate a robust plan.

As a starting point, you need to understand how much money you need in retirement.

For some this will be gaining an understanding of how much wealth will be required to fund a dream retirement.

For others it will be how much will be needed to retire in comfort. For some, sadly, it will come down to how much will be needed to avoid hardship.

A good place to start would be to attempt to estimate what sort of income you would like to have.

The second part of getting to grips with the figures is understanding what “capital” you will need to fund this income.

Include in this calculation your state pension, any occupational or personal pensions you have, any investments and cash you may have and any business interests.

The important aspect of this part of the plan is to be realistic.

If your sole solution to funding your retirement is to sell your business, you need to have a good idea whether anyone will want to buy it and what price they will be prepared to pay.

Remember, circumstances change. A thriving typewriter manufacturer in the 1970s may have assumed that someone would jump at the prospect of buying his business – a rational assumption to make until we all started typing our letters on personal computers.

Knowing how much you need compared to how much you currently have can be sobering exercise, but it is an essential starting point in forming your retirement plan.

If you have identified a shortfall in your provision then you have a decision to make.

Broadly speaking, you need to decide whether to realign your expectations (spend less in retirement) or make an effort to fill the shortfall by harder saving in the interim.

If you’d like to hear more about retirement planning, Dickinson Dees will be hosting a seminar on December 8. For more details, contact Krystle Elder on 0191 279 9986.

:: Jane Wilson, a manager in the wealth management department at Dickinson Dees.