Retirement allows you to do more of the things you enjoy. However, it doesn’t happen by accident and requires some planning.
To start your retirement planning, you need to consider how you would like your post-working life to look. For instance, do you want to travel, socialise, run a car, or spend time with family?
A comfortable retirement costs money, so deciding what you want to do will give you an idea of how much retirement income you need to achieve that lifestyle. If you want to retire early, planning is even more crucial. A financial advisor can help you with planning your retirement, check out Portafina.
Set aside worrying about how much income you’ll need for the moment. Now is the time to decide what you want to do. After that, you can calculate the money you’ll need and what you need to do to achieve that income.
When will you retire?
The UK has no set retirement age. Therefore, you can continue working for as long as you want or need. Of course, you can retire early if you wish, and you have the means to do so.
For instance, defined contribution pension holders have an option to access their funds from age 55. However, if you decide to do this, you may not have sufficient money to last your whole retirement.
This flexible pension access makes retiring gradually more of an option. You might decide to cut back your hours at work part-time. Doing so means you can continue contributing to your pension. It will also give you more income during the initial stages of your retirement.
You’ll need to know when you receive the state pension. If you decide to retire before then, you’ll need to find additional income to bridge that gap in the meantime.
Calculate your potential income.
Having decided what you want to do in retirement and when you want to retire, it is time to calculate your potential income. You’ll then have an idea if it measures up to your needs.
Gather your different pension details and decide whether you want to keep them separate or combine them. If you’ve moved employers throughout your career, you could have several workplace pension schemes, and it may take some time to track them down.
Once you have them all, you can find out how much money each has. You might choose to use a financial advisor for this. They can also estimate the level of income your pensions could provide.
Next, calculate your income from the state pension. You can receive a pension forecast from the gov.UK website.
Lastly, consider any other form of income you might have in retirement. For instance, rental properties, investments, other assets, or part-time work.
Does your income match your needs?
Once you’ve worked out your likely income, compare that to your retirement aspirations. Does your potential income match these?
If it does, that is fantastic, as it means you can afford the retirement you want. However, if your income does not match your preferred retirement lifestyle, you’ll need to do something about it. For instance, making additional top-up payments to your pension.
Drawing your pension funds.
You should also think about drawing your pension funds. How you do this can be just as significant as the amount of savings you have.
You have several options, some offering flexibility but with an element of risk. Others are more secure but less flexible. A financial advisor can help you achieve a balance that fits your situation.
Approaching retirement.
As you approach your retirement, there are several people you must speak to. Firstly, you should let your employer know about your retirement plans. Doing so will allow them to offer you an alternative position, such as part-time work.
You’ll also have to get in touch with the HMRC, as your tax code will likely change on retirement. Also, contact the Department for Work and Pensions to let them know when you will draw your State Pension.
Now is also an excellent time to update your will. Of course, you are planning a long and comfortable retirement, but you should always cater to the unexpected. Remember, pensions are not covered by wills.
Into retirement
See your retirement as a new chapter of your life. Rather than viewing it as a single event, consider it the next period and a different stage. As such, continue looking forward and updating your plans on the way.