Your retirement is a fantastic opportunity for you to do more of the things you always wanted to do, but your working life prevented you from doing it. Of course, to be able to enjoy your retirement to the fullest, you’ll need to do some planning. Indeed, your wants for retirement will cost money, such as travel, dining out, visiting family, and so on. Therefore, the sooner you start planning your retirement, the more chance you’ll have of living the retirement you desire.
Set Your Retirement Date
Today, there is no set retirement age, so it is up to you to select the date you want to retire. Recent changes to pension freedoms aid your decision. For example, if you are in a defined contribution pension scheme, you can now access your pension funds from the age of fifty-five. However, if you want to ensure you have a decent income throughout your retirement years, you might have to hold off from taking a large lump sum too early.
Pension freedoms now make it easier for you to decide when and how you retire. For example, being able to access your pension funds from fifty-five means that you have the option to retire gradually, potentially working part-time until you stop working altogether.
Your retirement date may depend on when you can draw your State Pension. This retirement income may not be enough to sustain your lifestyle on its own, but it is an effective supplement. Therefore, understand when you’ll receive your State Pension and how much you’ll get.
Calculate Your Potential Retirement Income
Calculating how much income you’ll have for your retirement will help you plan what your retirement lifestyle will look like.
Your first step could be to locate all of your workplace pensions. If you’ve changed jobs several times during your working career, you could have as many workplace pensions as you’ve had employers.
When you’ve located them all, you’ll need to work out their values and decide what to do with them. For instance, you might want to combine them into a single scheme or leave them as they are. Don’t worry if this process seems a little daunting, as you can get help from a regulated financial advisor. They’ll also be able to estimate how much income your pensions might provide for your retirement.
Take the value of your pensions, and add it to the amount of State Pension you will receive. You can find this out by visiting the gov.uk website. Remember to include any other income sources you might have during retirement to give you an accurate estimation of the lifestyle you can have when you retire.
Does Your Income Meet Your Retirement Needs?
When you’ve estimated all your potential retirement income, work out how much it will cost to fund the retirement lifestyle you want. If your potential income exceeds the estimated costs of your retirement, then you are in a good position. However, if your expenses are greater than your income, you’ll need to take some action to prepare for your retirement. Topping up your pension or deciding to work a bit longer are two such options.
How Will You Draw Your Pension
Something else to consider is how you will draw your pension, and this can be just as important as the amount of money in your pension pot. You have various options for accessing your pension funds, each with a different degree of security, risk, and flexibility. Again, consulting a financial advisor will help you decide which option is best for your situation.
What You Should Do As You Approach retirement
As your retirement approaches, there are certain people and organisations that you’ll need to speak with, the first of which is likely to be your employer. Having a conversation with your employer early enough will allow them to find a replacement. It will also give you and your employer the chance to work out the best way for you to retire. For instance, they may be able to offer you flexible or part-time work to ease you into retirement.
Next, you’ll need to speak with HMRC as your tax code will change when you retire. Another organisation you should talk with is the Department for Work and Pensions, so they can arrange for you to draw your State Pension.
Your retirement is a significant lifestyle change, and it is an excellent milestone to update your will at this stage. As wills do not cover pensions, you should consider drawing up an expression of wish to cover this aspect of your finances.
You should view your retirement as the beginning of the next stage of your life. It can provide you with the opportunity to do new things and enjoy different experiences. Planning for your retirement will allow you to enjoy your retirement more, and hopefully, this article will inspire you to start planning today. Before considering your pension, speak to an FCA Regulated adviser such as Portafina or, view the info at The Money Advice Service.