Retirement is meant to be the reward after years of hard work. You should be seeing the grandkids, booking trips abroad and relaxing. You don’t want to be worrying about finances and questioning whether you can afford to be retired. As such, we have prepared some tips for planning your retirement.
How do you want your retirement to look?
First, you need to think about how you want your life to look like during retirement. Do you want to move closer to family? Do you want to move abroad? Are you looking for an adventure, or some peace and quiet after years of hustle and bustle? How your retirement looks will significantly affect your financial considerations. You might need to consider different retirement budgets, get familiar with foreign tax regimes, and take a look at your pension situation.
What income will you have?
Once you know what you want, you need to think about what you will have. This means you need to think about your likely retirement income. This income can come from a number of different avenues, the most basic being your state pension. With a full state pension you are entitled to £203.85 per week, as of the tax year 2023/24.
This may, however, not be enough, depending on the retirement path you have your heart set on. If you have an employer, they are obliged to offer you a private pension. This can come in two forms: Defined Benefit and Defined Contribution pensions:
- Defined Benefit pension – With these pensions, the size of your pot is dependent on certain criteria. These can include your salary while working there and the length of time you have been working for your employer. With regards to this your employer will pay you a certain amount each year once you retire.
- Defined Contribution pension – with these pensions, any money paid in by you or your employer is invested, with the pot’s value fluctuating depending on the success thereof. What you get is dependent on the pot’s value, i.e. the amount paid in, the success of the investments and how you decide to retrieve the money.
With both of these pensions you will be allowed to withdraw up to 25% of the amount tax-free.
Other from this, you may be able to look into other forms of income. This could include options like investments, property and rental income or possibly taking on some part-time work while retired. Thus, it is important to plan ahead to make sure that that dream retirement can truly become a reality.
When do you want to retire?
Knowing when you want to retirement is a critical criterion when establishing your plan. It allows you to set an informal deadline for yourself, and make sure your retirement preparation is on track. It may be wise to take into account the age at which you can access your pensions, for instance:
- State Pensions – Accessible from age 66 (being phased to 67 from 6th May 2026
- Defined Contributions Schemes – Normally accessible from age 55
- Defined Benefit Schemes – Normally accessible from ages 55-65
What can you do now?
One of the most important tips for having a good retirement pot is the simplest: start as early as you can. No matter where you are in your career, contributing to your pension will have a very positive effect regarding your retirement outlook, and getting into the habit early will be extremely beneficial.
The best thing you can do, however, is make a plan. Speak with your financial advisor, assess your options, your situation and your dream retirement and look to grow your pension fund. Having a plan will allow you to have peace of mind and remove any avoidable financial turbulence you might experience once you officially retire.
Talk to one of our expert financial advisors today, to discuss your pension planning and achieving your ideal retirement outlook.