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Unsure Of How To Plan For Your Retirement? Read This To Find Out

Friday 26th November 2021

You may have dreams of how you want to spend your retirement. However, your dreams can fail to become a reality because you fail to plan.

Travelling, dining out, entertaining friends and family all cost money. Therefore you need to do some planning.

Understanding what you want to do during your retirement gives you an idea of how much income you'll need. If you intend to retire early, this mainly applies.

Get started by considering everything you want to do in your retirement. Rule nothing out at this stage, as you can decide what is financially feasible later. To help you calculate the income you'll need to retire on, perhaps consult with a regulated financial advisor such as Portafina.

Choose When You Retire

There is no set age at which you have to stop working, so you can choose your retirement point.

However, there is a minimum age to access your defined contribution pension scheme - fifty-five. Of course, you can choose to extend this age, giving your pension more opportunity to grow.

Accessing your pension early offers greater flexibility in your retirement. You have the option of taking some money early and continuing to invest the remainder in your pension. Accessing your funds in this way enables you to stage your retirement, slowing down gradually rather than slamming on the brakes.

It also means you can cut your hours back and work part-time. Doing so will enable you to continue paying into your pension, boosting your income when you fully retire.

The age you receive your State Pension and the amount you'll receive will also affect the age at which you retire. While it's unlikely to provide you with all the income you need, the State Pension will be a considerable boost to retirement income. As you'll not receive this until your mid-sixties, early retirement means you'll have to have something to replace it in the meantime.

Calculate Your Retirement Income

Calculating what income you'll likely have for your retirement will give you an understanding of how well that matches your retirement aspirations. When going through this task, ensure you consider all your sources of income.

The good news is that you might even have some income sources you're not aware of. For instance, if you've moved employers throughout your working life, you might have several workplace pensions, some of which you may have lost track of.

When you've located all of these, you can decide to keep them as separate funds or combine them into a single scheme. You can go through the same exercise for your private pensions too.

Don't worry if you feel unable to make a financial decision of such magnitude. You can consult with a regulated financial advisor to get some assistance with deciding. While they are at it, you can ask them to provide you with an estimate of your pensions' values and the potential income they'll give you.

You should also get a State Pension projection, and you can get this from the Gov.uk website. You'll only receive this income when you reach your mid-sixties, and the amount you receive will depend on the amount of National Insurance contributions you've made over the years.

Finally, consider any other income streams you could have for your retirement, such as rental property, investments, or other assets.

Will You Have Sufficient Retirement Income?

Having calculated your potential income, you can assess whether it will be sufficient to cover your retirement.

If your income falls short of your aspirations, you should speak with a financial advisor about ways to boost your retirement funds.

How You Will Draw Your Pension

Something else to consider is how you will draw your pension, as this can be just as crucial as the amount of money in your fund.

You have several options for accessing your pension funds, some offering greater flexibility while others provide increased security. Of course, you can combine different methods of drawing your pension to achieve the balance of security and flexibility you need.

As You Near Retirement Age

As you near retirement age, you'll need to keep certain people informed. To begin with, your employer should know about your retirement plans.

They will need time to find a replacement for you, and that search could take some time. They also may be able to offer you an alternative position or reduced hours in your present post.

Next, you need to speak with HMRC so they can adjust your tax code when you retire. For your State Pension, you'll have to inform the Department for Work and Pensions and let them know when you reach State Pension qualification age.

As you reach retirement time, it will be an excellent time to review your will. You have plans for a long and comfortable retirement, and having your will up to date will help you achieve your objectives. You should also understand that pensions are not covered by a will but by an expression of wish.

Retirement and beyond

Your retirement should mark the beginning of a new and exciting stage of your life.

You should not view it as a standalone event but rather as a continuous period. As such, be prepared to review your plans along the way regularly.