For many, retirement is an exciting time to do the things you’ve always wanted to. Perhaps you’re looking forward to more free time with friends and family, the potential for exploring new hobbies and interests or maybe even taking some trips and having new adventures. However you envision your future, retirement is an exciting new life stage. As such, there are plenty of variables to take into account when considering your retirement income needs. You will need to think about the types of events that you would like to happen after you retire that may impact your budget. Getting a head-start on these considerations could help you when you’re deciding the best way to take your pension savings.
In recent years, the very concept of retirement has evolved and changed. ‘Phased retirement’ is becoming increasingly more common; the way we access our pension is now a lot more flexible, and in the UK we’re living longer than ever before. A longer retirement and more choice over how you take your pension require forward planning to help ensure financial security for your future.
Although you may be retiring from full-time employment, you may wish to earn money from part-time work. Besides the State Pension, consider any other income sources you’ll have when you finish working full-time and find out when they will commence.
It may be the case that you have children or grandchildren that you plan to help through further education, or onto the property ladder. We all want the option to be able to support our loved ones financially. It is worth considering how you will provide this financial support once you’ve retired and make a plan for how you will afford it.
Leading a healthy lifestyle can help ensure you’ll be fighting fit during your retirement. Unfortunately, no matter how well we take care of ourselves, ill-health can strike at any time. Although it may be uncomfortable to think about, it’s important to factor things like medical costs into your financial planning.
In the longer term, you may also need to pay for residential care for yourself, your partner, or your parents. It is best to be prepared for all eventualities where health and later-life care is concerned.
If you are a homeowner, you may have considered selling your property and moving somewhere that better suits your lifestyle needs. You’ll also need to think about how you would pay for a new home, and factor in any repair or renovation costs.
The amount you have in savings may influence what you’ll need from your pension. Is this enough to live on?
The way you choose to take your pension can impact things like your tax position or pension allowances. If you choose to move provider, you may lose any guarantees that you may have with your existing pension provider. You should also think about the impact that taking any tax-free cash, income or lump sums may have on any means-tested benefits you currently receive.
The effects of inflation may reduce the buying power of your savings and investments in the future, so think about how you’ll maintain your lifestyle if your money doesn’t stretch as far.
Whilst there are lots of variables to consider when planning for your retirement, it is always best to be prepared to make sure that this exciting new chapter is as positive and worry-free as possible.