this is a collaborative post
It may not seem like it, but your retirement is an opportunity to do more of the things you enjoy. However, to do this successfully will need some planning, and firstly deciding what exactly it is that you want to do in your retirement.
For instance, do you want to travel, spend more time with your family, do plenty of entertaining, or run a car? These things require funding, so you need to work out what income you need to sustain your retirement lifestyle.
The sooner you start planning, the better, as it will give you more time to save and build up your retirement funds. Now might also be the time to speak with a financial advisor about your retirement income requirements, getting experienced guidance from a specialist such as Portafina is a great way of getting started.
When will you retire?
Part of your planning will involve deciding when to retire. No mandatory retirement age exists in the UK, so you can continue working for as long as you want. One factor that will affect when you retire is having access to your retirement funds.
If your pension is a defined contribution scheme, you should be able to access it when you reach 55. However, if you want your pension funds to last your entire retirement, you’ll likely have to leave it invested for longer.
This flexible pension access means it is now easier to stage your retirement. Perhaps you might want to reduce your hours in your present position or change to a part-time job so you can continue saving for your retirement.
Another aspect of planning is to understand your state pension entitlement and when you are likely to receive it. Although this benefit is not substantial enough to sustain your retirement on its own, it will be helpful as a supplement to your other retirement income.
Calculate your potential retirement income.
Of course, to understand what you will be able to do in retirement, you need to know how much you have to spend. Therefore, part of your planning is calculating your potential retirement income.
You may have several workplace pensions scattered around the place, and you’ll need to track these down. You also need to decide whether you will keep them as separate plans or combine them into a single scheme.
Your decision whether to combine them or not will depend upon a few factors, including their value. A financial advisor can assist you in deciding, and they can also help you assess what level of income they will provide.
As I mentioned previously, you need to understand how much you will receive from the State Pension. You can get a forecast of your entitlement from the government website.
Once you’ve worked out your income from your pensions, you can consider other income sources you might have when you retire. For instance, other investments, rental properties, or money from part-time working.
Do things add up?
Once you’ve calculated your potential retirement income, you can then assess whether it will sustain your desired retirement lifestyle. If the cost of your lifestyle is lower than your likely retirement income, that’s excellent news as it means you’ll be able to afford it.
However, if the costs exceed your likely income, you’ll need to generate another source of income or start making top-up payments to your pension. Again, speaking with a financial advisor will help you better understand how to maximise your retirement savings.
Drawing your pension
Another aspect of your retirement planning is to think about how you will draw your pension. The way you draw your pension funds can be just as significant as the size of your pension pot.
You have several options when it comes to accessing your pension funds. Some of these options offer greater flexibility but come with more risk. Others provide you with more security but tend to be less flexible. However, you can combine these two methods of drawing your pension funds to balance your financial situation. This is an area where a financial advisor will certainly be able to help you.
As you approach retirement age.
As you approach retirement age, there are a few things you need to do. First off, is to talk with your employer and let them know your retirement plans. Doing so will allow them to find a replacement. They may even offer you the opportunity to work past your retirement age with reduced hours or on a part-time basis.
You also need to inform HMRC so that they can adjust your tax code for retirement. You need to contact the Department for Work and Pensions and tell them your retirement date to start drawing your State Pension.
Now is an excellent time to consider updating your will. Although you’ll be expecting a long and comfortable retirement, updating your will is a good idea to cater for any unexpected events. However, your will does not cover your pensions, and you need to make an Expression of Wish for these.
Your retirement marks the beginning of a new life chapter. You should consider it not a standalone event but a new and exciting period of your life that will involve different stages. Therefore keep looking ahead and updating your retirement plans as you go.