Recent figures suggest that the number of people working into their 60s has almost doubled in the last 30 years.
A report from Legal and General and the Centre for Economics and Business Research (CEBR) found that rates of employment among the over-60s had risen from 23% in 1992 to 41% in 2021.
The number of over-50s in work has increased by 36% in the last two decades and will hit almost half (47%) by 2030.
If you are approaching your 60s and intend to keep working – whether through choice or financial necessity – your decision is likely to be based on more than one competing factor.
Working for longer, especially as part of phased retirement, is becoming an increasingly popular choice, but good financial planning can make sure that working into later life is just that: a choice.
Keep reading for your guide to phased retirement and how to plan your pension to ensure you can enjoy the retirement lifestyle you dream about.
Those approaching retirement now are relatively poorer than previous generations
Recent research from Which? has found that two-person households need an average annual income of £26,000 to enjoy a “comfortable” retirement. The figure rises to £41,000 for a “luxury” retirement, which the report suggests would include long-haul flights and a new car every five years.
While over-50s still hold the majority of UK wealth, the share for those aged between 50 and 64 has fallen from 42% to 36% in the last decade. As the State Pension Age continues to rise, life expectancy increases, and comparative wealth decreases, if you are approaching your retirement, you may find you need to work longer to guarantee your desired lifestyle.
Working for longer, even as part of phased retirement – where you decrease your hours as you begin to take a small pension – might be your best option. But good financial planning, even in the last few years before you retire could make the difference between taking phased retirement as a choice or as a necessity.
The benefits of phased retirement
1. The financial benefits of taking phased retirement
Phased retirement allows you to continue earning, even as you start to draw pension benefits. You can use the skills you have built during your career to work fewer hours in the same role or move into a new part-time job (in a consultancy role, for example) while supplementing your wages with hard-earned retirement income.
If you have other investments or sources of income (such as from buy-to-let properties), you could use your regular wage packet or your monthly pension to cover fixed expenses. This would leave your other sources of income available to fund discretionary expenses such as trips away during your newly acquired time off.
Managing your pension and your employment income carefully should allow you to gradually decrease your hours until you can afford to retire fully on a level of income sufficient to provide you with your ideal lifestyle.
There are tax implications to consider before you opt for phased retirement, such as the possibility of triggering the Money Purchase Annual Allowance, and exceeding your Personal Allowance, so be sure to speak to us before you decide.
2. The emotional benefits of a phased retirement
The days of the cliff-edge (what the L&G report refers to as “carriage-clock”) retirement are largely gone. The thought of going from full-time work one day to a full-time retirement the next might fill you with dread.
Phased retirement allows you to ease more slowly into retired life, helping you to understand what you want from retirement and what you’ll miss most about work.
Maintaining social interactions outside of your former career might mean spending more time with family or fitting former colleagues into a new social schedule. Equally, it might mean taking up new hobbies and making new friends.
How good retirement planning could make working into later life an option rather than a necessity
At Boolers we can help you build a retirement plan that considers:
We can then take a holistic view of your whole financial position, taking the time to understand your current and future income streams, working with you to make your retirement dreams a reality.
Get in touch
If you would like to discuss your retirement options or any aspect of your long-term financial goals, please contact us today.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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