When should you start planning for your retirement?
The truth is, it’s never too early to start putting plans in place for your retirement. There are a range of actions you could take, such as making regular payments into a pension plan, consulting a financial advisor to discuss investment options and writing a bucket list of everything you hope to achieve before you retire.
Practically speaking, the Money Advice Service recommends putting some serious thought into your retirement options approximately two years before you intend to stop working. This is not something to be taken lightly, as the decisions that you make are likely to have an impact on your financial position for the rest of your life.
If thinking about your retirement plans has left you feeling overwhelmed, unsure or just a little confused about where to begin, read on for our tips on how to take some of the stress away.
Calculate your expected retirement income
Before you can make any concrete plans for your retirement, you’ll need to ensure you have an understanding of your financial position. You can obtain a State Pension statement from the GOV.UK website, ask for a statement from your work-based pension scheme and track down any ‘lost’ pensions using the government’s Pension Tracing Service. If you have any other savings and investments, make an appointment with an independent financial advisor to discuss how these could be best used to enhance your retirement income.
If your pension pot isn’t looking as healthy as you’d like, it’s worth considering making additional contributions during the last few years of your employment before you retire. Otherwise, you may even want to consider continuing to work for a few more years than you had originally planned.
Update your personal budget plan
Not only will your income change when you retire, your outgoings will too. Costs related to work will reduce (e.g. the cost of commuting, paying for lunches and keeping your work wardrobe up to date) but you’ll find yourself paying more for other things such as heating your home and keeping busy with social and leisure activities. Look at your existing household budget and think about how you are currently spending your money. If you are currently paying off any debts, make arrangements to ensure these are all cleared by the date you plan to retire.
Next, think about what you want your retirement to look like. Are you planning to take lots of holidays, make home improvements (for example adjusting your bathroom facilities to make them suitable for later life) or spend lots of time with your grandchildren? Once you know how you’re hoping to spend your free time during retirement, you’ll have a better idea of any changes you’ll need to make now to ensure you can achieve the lifestyle that you want. For example, you may wish to consider downsizing your home, doing your food shopping at a cheaper supermarket or switching utility providers.
Find out whether you’ll be eligible for any benefits
The Age UK website has a free Benefits Calculator which can be used to find out whether you’ll be entitled to any financial assistance during your retirement, for example Housing Benefit Attendance Allowance and Pension Credit.
Prepare yourself emotionally
During the years leading up to your retirement, you might find yourself counting down the days until you can start your life as a retiree. However, it’s important to bear in mind that the reality might not live up to your expectations. You’ll gain much more free time, but if you don’t find ways to fill it with activities you enjoy, you could soon find yourself feeling lonely or down. If you’ve always wanted to pursue an interest or hobby, now’s the time to start finding out how best to make this dream a reality. Leaving your job will probably mean a reduced social circle, so consider taking an evening class, joining a club or inviting a neighbour round for a cuppa.
In summary, no matter which age group you fall into, it’s always sensible to have your retirement plans at the back of your mind. Always remember that it’s best to discuss any complex finance issues (including multiple pensions and investments) with a regulated independent financial advisor.