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Retirement can be an exciting phase of your life and one in which you have the freedom to do more of what you want to do. Perhaps you want more travel, more time with the family, move home, or tick off a few more of your bucket list entries.
Regardless of your aspirations, these things will take money and require some planning. Therefore, it’s vital to know what you want to do in retirement to work out how much your lifestyle will cost. When you’ve got a relatively clear picture of how you want your retirement to be, you can consult a regulated financial advisor to work out a financial plan to achieve it, check out Portafina.
Deciding when to retire
Part of your retirement planning is deciding when to retire. There is no longer a set retirement age for UK workers, and changes to pension regulations mean you have much more flexibility than previous generations. If your pension is a defined contribution scheme, you should be able to access your funds from age 55.
Such flexible access allows you to stage your retirement incrementally rather than go from working full time to total retirement. Working part-time will enable you to continue contributing to your pension and enjoy the tax-free benefits of your contributions.
The age at which you receive the state pension may have risen by the time you come to retire. You can check your projected state pension age and the amount you will receive by visiting the gov.uk website.
Calculate your likely retirement income
When you have an idea of what you want to do during your retirement, you can calculate your potential retirement-income to see if it matches your aspirations.
Pensions are likely to feature heavily in your calculations, and you may well have a number of these. If you have had several jobs throughout your career, you may have several workplace pensions. Therefore, you must track down any that you have lost or misplaced.
Having tracked down these pensions, your next step is to determine how much they’re worth and the income they will likely provide you. To do this, you can seek advice from a regulated financial advisor.
You should also include the state pension in your income calculations. Once again, the guv.uk website is where to look for this forecast.
Finally, include other forms of income you might have during retirement. For instance, you may have other investments, rental properties, or part-time work which will contribute to your income.
Does your potential income match your retirement aspirations?
When you work out your potential retirement income, it is time to set that against your spending aspirations and see if they match. Suppose your income exceeds your spending plans that is excellent news. However, if it is less, you need to do something about it.
You can either downwardly adjust your spending plans or put measures in place to increase your income. Speaking with a regular financial advisor will help you improve your retirement income. They can advise you on various aspects of how to maximise your pension pot, such as making regular top-up contributions.
How will you draw your pension?
The way you draw income from your pension can be as significant as the amount of money you have on your pot. Therefore, you must consider doing this in advance of drawing your pension.
You have several options when it comes to accessing your pension funds. Some options offer excellent flexibility but come with greater risk, while some provide added security but are less flexible. Of course, it’s possible to achieve a suitable balance between these options, and a regular financial advisor can advise you on how to accomplish this.
Nearing retirement age
As you get closer to retirement, you need to inform several people. Firstly, your employer needs to know when you will retire, so they have an opportunity to find someone new or offer you an alternative role or reduced hours.
You also need to inform HMRC, as they will need to adjust your tax code accordingly when you retire. Another government department you should contact is the Department for Work and Pensions, so you can start drawing your state pension at the appropriate time.
Retirement is an ideal time to update your will. Although you are planning on a long and comfortable retirement, it makes sense to make sure things are in order if the unexpected occurs. Remember, a will does not cover pensions. Therefore, you should include an Expression of Wish to protect these.
You should not consider retirement as a one-off event but more as a new stage of your life. As such, you should continue to assess your financial plans and adjust them as required.
Hopefully, this brief article will help you with your retirement planning so that you can have an enjoyable and comfortable life when you stop working.