Retirement is the time of life when you can do more of the things you enjoy and spend more quality time with friends and family. To ensure you have the retirement you desire, you must plan for it. Doing all the things you want and sustaining the retirement lifestyle you’ve envisaged will cost money. You’re going to have to ensure that you have enough retirement income for these things, so you’ll need to start planning as soon as possible.
There is no time like right now to start your retirement planning. Starting to plan early will allow you to think big about your retirement lifestyle, even if you’re unsure how you’ll achieve it.
When you’ve got your ideal retirement lifestyle fixed in your mind, talk it through with a financial advisor. They’ll be able to give you an estimate of what you need to put in place to achieve your retirement dreams.
Choose When You Want To Retire
The age you retire is down to you, as is how long you want to work. There is no set age at which you are forced to retire, so if you need to carry on working later in life, you can. However, there is a set age at which you can access a defined contribution pension scheme. That age is fifty-five, but again you can delay accessing it at this age, so it has more opportunity to grow.
This early access to your pension gives you more flexibility in retirement. You can access some of your money early while leaving the remainder in the pension to provide income later. This type of access means you can retire in stages or gradually, rather than going from full-ahead to full-stop.
This flexibility also means you can cut back your hours, or work part-time, while still contributing to your pension fund. So, you can have more of an income in later years when you retire fully.
Find out what age you can draw your State Pension and how much you will receive. It may not be the largest source of income you have, but if you want to retire early, you might have to find a source of income to replace it in the meantime.
Calculate Your Retirement Income
This calculation will not be exact, but the closer you come to retirement, the more clarity you’ll have about exactly how much income you’ll have. Hopefully, your income will match the expectations you’ve had for your retirement lifestyle. If not, maybe it’s time for some more planning.
If you’ve worked for several employers during your working life, you could have several pensions. It is easy to lose track of these, but you should try to relocate them as soon as possible. When you’ve located all your workplace pensions, you can then decide to leave them where they are or combine them into a single pot. If you have multiple personal pensions, you can do the same with these.
A regulated financial advisor will be able to help you decide what to do with your pensions. They will also be able to help you work out the level of income your private and workplace pensions will provide on your retirement.
The next thing to do is determine how much State Pension you’ll receive. To get the full State Pension, you need to have made thirty-five years’ worth of contributions. The government website has a pension forecast tool to assist with this calculation.
Lastly, factor in any other income you might receive, such as other investments or income from property rental.
Do You Have Sufficient Income?
Once you’ve calculated what your retirement income is likely to be, think if it will be sufficient to sustain the retirement lifestyle you want. If you feel you’re going to need additional income, you should speak with your financial advisor and get their advice on how you can increase your retirement funds.
Drawing Your Pension
How you draw your pension is just as important to think about as the size of your pension pot. You have various options available to draw your pension, with some offering greater flexibility and some being less risky than others. Whichever way you decide to draw on your pension, it will come down to a balance of security and flexibility. Your financial advisor can explain the details and risk profile of your various options.
What To Do As You Approach Retirement
As your retirement gets closer, you should speak to some key people. Your employer is the first of these. Talking through your plans with your employer could lead to you being offered alternatives such as reduced hours or a less demanding position in the company.
The next to talk to is the HMRC. They need to know about your imminent retirement so they can adjust your tax code. Another government body you need to speak with is the Department for Work and Pensions. They’ll need to know when you’re going to draw your State Pension.
Retirement is a significant change in your life, and it is an excellent time to update your will. Your private pensions will need to have an expression-of-wish placed on them because they are not covered within a will.
Into Your Retirement
You’ve worked hard all your life, so hopefully, your retirement will be comfortable and rewarding. Retirement is not a single event; it is a continuous period. Situations change, and you should be prepared to update your plans as you go through your retirement.
If you are now starting to think more about your pension, consider using a regulated adviser like Portafina or view the advice at Pension Wise.
