Approaching Retirement (55+)

You may be reviewing your approach to retirement or changes outside of your control may be impacting on your plans e.g. health or redundancy. At this stage you may have a target date for retiring, or thinking of extending your working life, perhaps working part-time.

You may have a bucket list of things you wish to do during your retirement. However, you choose to spend your time after leaving work, you are going to need a pension fund  and other income producing assets to supplement your State Pension.

During retirement there are three main stages that we refer to; active, passive and support. It is helpful to be aware of these stages to help you plan your income requirement in line with the costs of each stage.

Active is when you first enter retirement and spend a significant amount of time and money traveling, making home alterations, buying new luxury items and doing things you have always dreamed of. If you retire before State Pension Age, you’ll have to fund the income gap until you start receiving State Pension.

Passive then follows, a slowdown of responsibilities and outgoings as you begin to relax into retirement and enjoy less strenuous activities. You have fewer holidays and spend more time in and around your home.

Many, unfortunately, need help later in life and require additional support, particularly if they want to stay in their own home. In-house support or residential care can be expensive and can eat significantly into the assets that you had expected to pass on to your family. This is the stage where outgoings can increase dramatically to fund care, medical bills and health care. This is an important stage of retirement to be prepared for as cost is often directly linked to the quality of care you receive.

Now is the time to consider what each of these stages are likely to cost and the impact this will have on your pension options. We can help you to understand the financial impact and consider what the best approach is to planning your retirement. This includes weighing up the pros and cons of the certainty of annuity based products against the flexibility of drawdown products (or a blend of each). You must be confident that your pension fund and other assets can sustain you.

We can produce cash flow forecasts to illustrate how your income will last in different scenarios of longevity, economic performance and lifestyle choices.You may have to face up to some harsh reality and change your plans. It’s important that you understand your position and the impact of your decisions now for your long term.

If you haven’t already, you should fuel your pension as much as possible at this point, contributing as much of your disposable income as you can to ensure you have enough in your pension pot to support your lifestyle during retirement. Other assets can also be funded; variety assets tax planning in retirement.

An option that is largely overlooked is appointing a lasting power of attorney. As you enter retirement it is useful to be prepared for everything surrounding later life. Lasting powers of attorney are needed in case you lose capacity to make decisions. These decisions can include; finances, estate, will, health care or pension issues. It is important to put this provision in place while you are still able to do so.

Taking Independent Financial Advice at this stage in your life could help you plan and secure your long term retirement income in a tax efficient manner. Contact us at People and Business. Click here