After years of hard work, the time has finally come to begin thinking about retirement and it pays to be prepared as retirement nears. Usually, around two years before you want to stop working is a good time to start thinking about your retirement options and the choices you’ll need to make.
Take a look at our top 5 things to take into consideration when planning your retirement.
How long your pension will last
It is important to consider the best time for you to claim your pension, taking into account how much you have saved and if it will fund future plans you have for retirement. For example, if you plan on travelling during your retirement, it is important to ensure that you have enough money to do so and live comfortably.
You need to consider that your pension and other savings will need to last for as long as you do. If you were to retire at 65 today, you can expect to live for approximately another 20 years; however, everyone is different and some people may live much longer.
Work out your likely retirement income
As retirement approaches, it’s crucial that you know how much your pension savings are worth to make sure they are on track to provide the level of retirement income you think you will need when you stop work. Between four and six months before you plan on retiring, your pension scheme or provider will send you an information pack telling you how much money you have saved in your pension pot.
Once you know this, you’ll be able to work out when you can afford to retire or whether you need to delay taking your pension. You can also use a pension calculator to help you work out what you might have to retire on, including your state pension.
Planning for inflation
Inflation is the rise in the prices of commonly used goods and services, such as food, clothing, and housing. Over time, inflation will increase prices meaning your pension pot won’t be able to afford as much as it did before. For example, in 20 years’ time, you may need more money than you do today to buy the same goods and services.
It’s useful to work out your own outgoings so you can estimate how much you’ll need. Whilst some of your costs will reduce or be removed completely when you retire, for example if you’ve paid off your mortgage or other debts they will reduce costs, and others such as fuel bills may increase.
Try to clear existing debt
Beginning your retirement as debt-free as possible is a sensible, stress-free way of beginning your well earned time to yourself. Whilst using the money in your pension fund might be a tempting way for you to deal with your debt in a way that otherwise you could not afford, this will impact what you can do in future.
Your income is likely to reduce when you retire unless you plan on taking on part-time work, even so, any fixed repayments will take up a bigger share of it. If you take money from your personal pension, it may affect whether you are able to use some other options for dealing with your debts.
Get advice before finalising your choice
We recommend getting in touch with a financial advisor before making decisions that can shape your income for the rest of your life.
Pensions can be a confusing topic for most people, we want to help you make the most of your retirement. There are a lot of options available to you, many that you may not be aware of when you are approaching retirement, we are here to discuss your retirement plans and tailor our advice to fit your specific circumstances.
If you have any questions or concerns about you retirement plan, get in touch with a member of our team today, we are happy to help.