Have you started planning for your retirement yet? It doesn’t matter how old you are or what stage of life you’re at: if you haven’t mapped out a plan for your retirement yet, now is the time to start.
Research suggests that a single retired person will need at least £19,000 a year just to cover the essentials of day-to-day life – but is that really all you want from your retirement? To plan successfully, you need to envision what you ideally want your retired life to be like and determine how you can achieve that lifestyle.
When do you want, or need, to retire? What lifestyle do you want to have when you do? Is your current financial projection going to support those plans, or do you need to make some serious changes?
If you’re starting to consider your retirement strategy, you’re taking the right first step. Here are our top five tips to help you on your journey.
Tip 1: Set your retirement goals
Think about the kind of lifestyle you want to have once you stop working. If you don’t already have a perfect vision of what retirement should be, break it down by asking yourself questions. Do you want to travel, move to a different area, spend more time with your family and friends? Will you be content with a modest lifestyle, or do you want to maintain a higher standard of living? Are you planning to downsize your property, or are you aiming to stay in the home you live in now? If the latter, are you aiming to pay off your mortgage before you retire or do you need to factor those payments in?
Understanding those aspirations will help you determine what income you will need to support them. Once you have a vision and an estimate, you can then calculate how much you should be saving each month to achieve it. Setting specific targets – such as booking that dream holiday, passing money to your children or grandchildren – will give you a clear path to follow and help keep you motivated, especially if you need to make significant changes to get to your goal.
Tip 2: Map your current finances
You’ve got your goal, now it’s time to gauge how realistic it is given your current financial situation.
- Assess your income, expenses and existing savings to get a clear picture of where you stand now.
- Look at your investments, or other assets you may hold.
- Take stock of any debts, such as mortgages, loans or credit cards, as these will obviously impact your ability to save for retirement. Clearing high-interest debt should be a priority, as the less financial liabilities you have, the more you can allocate to your retirement pot. This will also free up more income when you do retire.
Understanding your current financial landscape, along with your ideal timeline to retirement, will allow you to recognise what you need to change now in order to make the retirement you want a reality in the future.
Tip 3: Maximise your tax efficiency
One of the most effective ways to boost your retirement fund is to maximise tax efficiency. Making use of tax-advantaged accounts, like pensions and ISAs, can significantly boost your savings. Employer pension schemes often come with contributions that match or exceed your own. In some instances, employers also allow contributions to be on a salary sacrifice basis, which makes them a powerful tool for growing your retirement pot.
In addition, the government will also contribute to your personal pension via tax refund. If you’re a basic rate taxpayer, you could get as much as 25% of your contributions topped up and 40% or 45%, if you are a higher rate or additional rate taxpayer, although there is an annual limit.
It’s also essential to consider how you withdraw your savings in retirement, as certain strategies can minimise the amount of tax you pay on withdrawal, ensuring you make the most of your hard-earned money.
Tip 4: Understand your pensions
Pensions are obviously a key element of retirement planning, so it’s essential to understand the different types you have, how they function and their projected value. You might have a workplace pension, a personal pension, or a combination of both.
If you’ve worked for multiple employers, chances are you have several pension pots with different providers, and it may be worth considering consolidating these. However, before you do, make sure you understand any fees involved and assess any wider impact it might have on your retirement plans. For instance, some pensions allow for more control than others, and different schemes may have different levels of risk.
If you have a defined benefit (final salary) pension, it’s important to understand the specific benefits it offers and how they fit into your overall retirement plans. Defined contribution pensions are more flexible, but they also involve investment risks. Monitoring the performance of your pension investments and ensuring they remain aligned with your goals is critical: consulting a financial adviser can help ensure you’re making the most of your pensions and staying on track to meet your retirement objectives.
Tip 5: Review your retirement plan regularly
Retirement planning isn’t a one-time task; it’s an ongoing assessment process that requires regular review and adjustment. As your circumstances change – whether it’s a shift in career, a fluctuation in income or new family responsibilities – your retirement plan may need to be updated.
It isn’t just personal changes that might affect your retirement planning. Both global and local economics can have an impact on pensions, investments, and taxation on your pay-outs come retirement. Keeping up with changes and proactively making informed decisions at the right time can make all the difference to your pension pot in the future.
It’s a good idea to, at the very minimum, set an annual review date where you assess your progress, evaluate any changes needed, and make necessary adjustments to your plan. However, you may want to check-in more regularly, especially if investments outside of pensions play a significant role in your retirement plans. This is where appointing an independent financial adviser can alleviate some of the pressure, as they will monitor your finances more closely and make sure you are staying on track with your retirement planning.
Speak to an independent retirement planning specialist today to discuss your options
Remember, the earlier you start planning, the better your chances of achieving the retirement lifestyle you want. At Flying Colours, we’ll help you identify your retirement goals and advise you on the best way to achieve them, from maximising your savings to bolstering your investments.
Enjoy your wealth today, while preparing for the retirement you want, with help from our team of financial advisers.
Call our offices:
Lincoln: 01522 437 360
Liverpool: 0151 317 7820
Bracknell: 01344 266030
or email: hello@fcadvice.co.uk
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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 (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance and you may get back less than you originally invested.
