Retirement provides you with the freedom and opportunities to do whatever you want. However, to take advantage of these, you need to do some planning. Going on a holiday, running a car, dining out, treating the grandkids, and so on all cost money.
If you haven’t done sufficient planning for your retirement, you’ll have fewer opportunities to enjoy the freedom this period of your life presents. If you plan on retiring early, it is more critical that you conduct sufficient retirement planning.
You can think big and consider all ideas during your retirement planning, no matter how outlandish they may seem. The time for assessing what is achievable can be left until later.
When you’ve got a picture of your ideal retirement, you can talk through your ideas with a financial advisor. They can give you an estimate of how much you’ll need to achieve your retirement goals.
Deciding On Your Retirement Age
The UK no longer has a set retirement age, and you can continue to work for as long as you wish or for as long as you need. Defined contribution pension holders can access their pension funds from the age of fifty-five. However, doing so could jeopardise your income during retirement, so you should seek regulated financial advice before using this facility.
Having such flexibility in your pension allows you to have a graduated retirement. For instance, accessing some of your pension funds might enable you to reduce your hours or work part-time. Consequently, you might be able to extend this part-time work so you can save more for your later retirement years.
Another factor that could influence the age at which you retire is when you will receive the State Pension. It may not be enough to retire on by itself, but if you plan on retiring before you qualify for it, you’ll need something to make up the difference.
Calculate Your Likely Retirement Income
Calculating your likely retirement income will give you an idea of how it matches up to achieving your retirement aspirations. Ensure you consider all your income sources when making your calculations; you may have some you’re not aware of.
If you’ve moved employers over the years, you could well have several workplace pension plans. Once you’ve located all of these, you have to decide whether it is best to combine them into a single plan or keep them separate. You’ll need to make this decision for any personal plans you have too.
A regulated financial advisor can assist you in making your pension decisions. They can also help you find out your pensions’ values and give you an estimate of their projected income on retirement.
Next, you can get a projection of your State Pension income. It is straightforward finding this out from the Gov.uk website. Remember that you’ll only receive this income when you reach the State Pension qualification age.
Lastly, add any other income streams you will have during retirement, such as rental property, assets, investments, etc.
Will Your Retirement Income Match Your Lifestyle Aspirations?
When you have calculated your income, compare it to the cost of your retirement goals and lifestyle aspirations. Is the cost of your retirement more or less than your income?
If it is less, then you are all set to enjoy the retirement of your dreams. However, if the cost is greater than your income, you will need to do something about it; save more, work longer, or adjust your expectations downwards.
Drawing Your Pension
Something else to think about when planning your retirement is how you will go about drawing your pension. There are various options available for drawing your pension, and the way you take your pension money can be just as critical to your retirement as the size of your pension pot. Ultimately, how you draw your pension will come down to the balance you want between flexibility and security. Your financial advisor can provide advice on this matter.
Things To Think About When Nearing Retirement
As you approach retirement, you need to speak to various people and departments. The first person you should talk to is your employer, to allow them to find a replacement. You will also need to inform HMRC of your pending retirement so they can adjust your tax code accordingly. Finally, you’ll need to notify the Department for Work and Pensions when you are ready to draw your pension.
This time is a good point in your life to update your will. Pensions are not covered in wills, so you have to include your intent for this in an expression of wish.
Into Retirement and Beyond
Hopefully, entering your retirement will mark the start of an exciting new phase of your life with plenty of new experiences. Remember, it is not a stand-alone event but an ongoing period of your life involving different stages. Therefore, you’ll want to continue looking ahead and update your plans as you go.
If you are looking at options for your pension, get in touch with a regulated pensions specialist like Portafina or, view the information at Pension Wise.