There are many things to consider when you’re nearing retirement age, but one thing’s for sure — being prepared is the best strategy. A few years before you are set to retire, taking the time to think about your options, reviewing your finances and getting the right financial planning advice, will ensure that you have a secure future income, so you can enjoy the later years of your life.
If you’re looking to retire sometime in the near-future, here’s our guide to the best places to start planning.
Calculate your likely retirement income
First of all, you should consider the amount of money you are likely to have or receive when you retire. These is a vital part of your retirement plan, as you want to make sure you have enough income to suit your lifestyle once you stop working. Think about how active you are likely to be, or the destinations you have always wanted to visit, and if your retirement plan will suit your future spending.
Working out your retirement income involves your State Pension, which is estimated by the amount of National Insurance you have contributed during your working life. On top of this, you need to look into if you have defined benefit or defined contribution pension which would come from your previous employment.
A defined benefit pension includes an amount based on the years you worked and how much you have earnt. On the other hand, a defined contribution pension depends on several factors, including the amount you have contributed during your work life, the performance of the fund’s investment, and the choices you make in terms of how and when you receive the income on retirement.
You may also have savings or investments, so you should collate the information and the likely amount you will receive from them. The final step is to track down all the old pensions that you may have from previous employments, from which each company or pension plan should be able to provide you with the most recent statement. The government provides a Pension Tracing Service, which you can also use to find out the previous pensions you may have.
Using a pension calculator can help you come up with an estimated income that you will receive when you retire, taking into consideration all of the funds previously mentioned. With this calculation, you can see if your expected retirement income will suit your desired lifestyle in later years.
Get your finances in order
You should be looking forward to retirement, and not have to worry about money. If you’re prepared financially, you should have the desired income to truly enjoy your retirement years. This involves getting things in place before that time occurs:
- State pension – This isn’t usually something that you receive automatically, so you will have to look into how to claim this benefit when you come to retirement age.
- Dealing with debt – When things change due to retirement, you don’t want to begin struggling with debt as a result of a decreased income, so it’s best to get rid of it before this happens, and plan to pay it off pre-retirement.
- Pension schemes – If you’ve contributed towards a pension pot, now is the time to look into how you wish to use it. There will plenty of options available, depending on the type of scheme, so you will need to look into what best suits your needs, in terms of how you will receive your income.
Dealing with your finances can be complicated, so it’s always recommenced to use a financial planning and investment service specifically for retirees, that can provide clarity about your funds and help to plan for your future.
Prepare emotionally for retirement
The final step in planning for your retirement, is to prepare yourself mentally for a big change in your life. Think about how you are going to spend your time, so that you don’t feel lost without work. You could think about a hobby you wish to pursue, or joining a club, and explore the different ways you will enjoy your retirement.