Planning and saving for retirement is a long-term prospect. But even as the culmination of your hard work arrives, there are still questions to ask and changes you can make.
With good preparation and sound financial advice, you can have confidence in achieving a financially secure retirement.
Here are five things you can do in the last few years before you retire.
1. Give your retirement plans a check-up
It’s never too late to revisit your retirement plan. Life-changing events can happen at any time and drastically alter your aspirations and your timetable. Even without major changes in circumstances, plans can change.
Your retirement date might have been decided long ago, but that doesn’t mean it’s set in stone. You might find that the type of retirement you want has changed.
The recent coronavirus lockdown might have reminded you how much you enjoy the social side of work. Maybe you’re now considering a phased retirement, rather than the ‘cliff-edge’ you’d originally planned?
You might have been working remotely, or been furloughed, for the first half of the year. Maybe you’ve enjoyed the time off and are now keen to bring forward the date of your cliff-edge retirement?
The pension option you choose will depend on what you want to do during your retirement. If you plan to spend money on so-called big-ticket items like around the world travel or house refurbishments, you might opt for a lump sum.
If you have known, fixed outgoings, and no one-off expenditures planned, you might choose the regular income of an annuity. By not taking a tax-free sum at all you could guarantee yourself a higher income.
Think about your retirement plans and how you will match them to the pension option you choose.
The average UK life expectancy is currently 81 years. Your pension fund – along with any investments you have elsewhere – might need to last thirty years or more.
You’ll probably want to leave some money behind to loved ones too.
Maintaining your standard of living in the present, factoring in your future needs, and leaving money to the next generation can be a difficult balancing act.
We can help you plan for the whole of your retirement, giving you peace of mind and confidence in the decisions you make. If you would like to discuss any aspect of your retirement, get in touch.
2. Check-in with your current providers
Your pensions are tax-efficient, and you may have more than one of them.
Check-in with each by requesting a valuation from your provider and top them up if you can afford to. The Annual Allowance is £40,000 for the 2020/21 tax year – that means you can save that amount into your pension each year and still benefit from tax relief.
Don’t forget the State Pension either. It won’t be your main source of retirement income, but at £9,110.40 a year in 2020/21, you shouldn’t leave it out of your plans either.
You’ll need 35 qualifying years of National Insurance Contributions to receive the full amount, so check for gaps and see how much you might get here.
ISAs are another tax-efficient way to save. If you have an ISA, make full use of the ISA allowance (£20,000 in the 2020/21 tax year) in the years leading up to your retirement.
Cash ISA interest is tax-free, and gains on a Stocks and Shares ISA are free of both Income Tax and Capital Gains Tax (CGT).
Make the most of these efficiencies while you’re still in full-time work.
3. Review your mortgage and clear your debts
By heading into retirement debt-free, you ensure that all your retirement income can be used to maintain your designed standard of living. If you can clear high-interest debt such as credit cards or loans before retirement, your pension income will go that much further.
A mortgage, too, can eat away at your retirement savings. Reviewing it could make a massive difference to the debt you take into retirement.
How many years are left on your current mortgage? Are you getting the best deal? Are there things you could do to clear your debt more quickly?
Ask yourself these questions and also consider switching providers. This can be especially beneficial when a fixed-term deal ends and your lender’s Standard Variable Rate (SVR) is about to kick in. Be sure to shop around for the best deal.
If you’d like help reducing your debt in the approach to retirement, get in touch.
4. Expect the unexpected
You might have Life Insurance benefits through work but what happens when you are no longer employed? Review your current provisions and be sure you have the necessary cover in place. If you’re unsure what you’re covered for, speak to us.
Do you have a will in place? If so, is it up to date? A will should be reviewed every five years or after big life events, so be sure it reflects your current wishes.
You might also consider a Lasting Power of Attorney (LPA). An LPA allows you to choose someone to manage your affairs if you become incapacitated through accident or illness.
Different types of LPA can cover the management of your daily finances – paying bills and collecting benefits on your behalf – or looking after your daily routine and medical care.
Having these things in place can give you peace of mind that you and your loved ones will be looked after should the unexpected happen.
5. Seek advice
The approach to retirement is a crucial time. By making full use of allowances, minimising debt, and preparing for the future, you can ensure you head into retirement financially secure.
But hard work doesn’t stop there. And the need for advice doesn’t stop either.
We can help you manage your retirement income, factor in the costs of later life, and plan your estate, helping you minimise the Inheritance Tax you are liable for.
Get in touch
If you’d like to discuss any aspect of your financial plan as you approach retirement, please contact us today.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
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