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Planning and preparing for retirement

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Why reaching our 50s and 60s often brings retirement into sharper focus

As we navigate life, reaching our 50s and 60s often brings retirement into sharper focus. This phase heralds a well-earned respite from years of dedication and hard work. For many, retirement is envisioned as the most extended holiday of their lives, offering opportunities to travel, engage more deeply with hobbies or spend cherished moments with family and friends. However, realising this idyllic vision requires thoughtful financial planning.

Ensuring your financial affairs are in order as you approach retirement is crucial. With longer life expectancies and an ever-evolving economic landscape, having a sound financial plan ensures you can maintain your desired lifestyle without financial stress. This planning involves understanding your income sources, managing your savings and anticipating future expenses.

Determine your retirement timeline

Deciding when to retire is a pivotal step in your financial planning journey. Unlike a one-size-fits-all approach, the choice of retirement age is profoundly personal and depends on various factors, including your financial readiness, health and lifestyle aspirations. Understanding these elements can help you make an informed decision that aligns with your long-term goals.

Role of financial readiness

One of the most significant determinants of retirement age is financial readiness. Many individuals cannot retire until they can draw from their pension schemes or are eligible for the State Pension. Assessing your finances, including savings, investments and expected pension income, is crucial in determining when you can comfortably retire without compromising your standard of living.

Understanding pension options

Different pension types come with varying retirement age rules. Workplace pensions, mainly defined contribution schemes, and older defined benefit plans often set a retirement age, typically around 65. However, these can differ based on the specific terms of your pension plan. Knowing the details of your pension arrangements allows you to plan effectively for retirement.

Accessing personal pensions early

For those with personal pensions, there’s often more flexibility. Currently, personal pensions can be accessed from age 55, although this threshold is set to increase to 57 by 2028. This earlier access can provide opportunities for phased retirement, allowing you to transition gradually from full-time work to retirement while supplementing your income with pension withdrawals.

Considerations for early retirement

Choosing to retire early can have significant financial implications. Early access to pensions means smaller annual payouts, as your pension pot needs to sustain you for a longer retirement. Additionally, retiring before reaching State Pension age means you will need to bridge the income gap until those benefits become available.

Balancing lifestyle and financial security

Deciding when to retire should balance your desired lifestyle with financial security. Some may continue working part-time to maintain an active lifestyle and financial health, while others prioritise leisure and personal pursuits. Evaluating your priorities and consulting with us will help clarify the best path forward.

Understanding your retirement income sources

Planning for retirement is crucial to ensuring a comfortable and secure future. One of the most important aspects of retirement planning is understanding your potential sources and values of retirement income. This involves gathering comprehensive details about your pensions, savings and investments. Once you have these details, obtaining estimates from each source will help you gauge the total income you might expect upon retirement.

Estimating income from savings and investments

Begin by compiling information on all your savings and investment accounts. This includes personal savings accounts, stocks, bonds and any other investment vehicles you own. Understanding this will help you strategise effectively for your future financial needs.

Planning your retirement income

Evaluate whether the combined income from your pensions and State Pension will suffice for your desired retirement lifestyle. Generally, you may need around two-thirds of your preretirement
salary after tax to maintain your lifestyle, though individual needs vary.

Boosting your pension contributions

Planning for retirement involves more than just setting aside a portion of your income; it requires strategic thinking about maximising your pension contributions. If there’s a likelihood of a shortfall in your future pension income, it’s prudent to consider increasing your pension savings now. Even minor adjustments to your contributions can have a notable impact on your pension pot, thanks to the power of compounding interest.

Understanding the impact of contributions
Many individuals adhere to the minimum contribution levels set by auto-enrolment schemes. While these minimums provide a good foundation, contributing more than the baseline can significantly enhance your financial security in retirement. The carryforward rules further support this strategy, allowing you to utilise unused allowance from the previous three years to maximise
your contributions where you have sufficient relevant UK earnings to support the contribution and obtain tax relief.

READY TO TAKE PROACTIVE STEPS IN YOUR RETIREMENT PLANNING?

Secure your financial future by taking proactive steps in your retirement planning today. If you need expert guidance or want to explore your pension options further, we are here to assist you.

Contact us to confidently navigate this crucial journey, ensuring that your retirement plans meet your long-term goals. Let us support you in making informed decisions for a secure and comfortable retirement.

Find Your Local Adviser

Financial advice when planning retirement

 1024 573 Jess Easby
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People who are confident about their retirement are most likely to have specific retirement goals and know what steps they need to take to reach them. But sadly, we see many people do not feel confident that they will have enough savings to live comfortably after they retire.

Many people have a fear of outliving their money, but most don’t have a clear idea of how much money they need during retirement. It’s important to remember that retirement doesn’t happen at a certain age, it happens when you have enough money to live on.

Seeking professional financial advice can help create a clear direction and understanding which will give you peace of mind that you are on the right track.

If you’d like to discuss your retirement, and would like to speak to an expert Financial Adviser, please get in touch:

Find Your Local Adviser

Free guide: planning and preparing for retirement

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Download our free Guide to Planning and Preparing for Retirement

 

As we navigate life, reaching our 50s and 60s often brings retirement into sharper focus. This phase heralds a well-earned respite from years of dedication and hard work. For many, retirement is envisioned as the most extended holiday of their lives, offering opportunities to travel, engage more deeply with hobbies or spend cherished moments with family and friends. However, realising this idyllic vision requires thoughtful financial planning.

Click here to download

Pension Awareness Week: Retirement Planning

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Are you ready for the retirement you want? 

At 12.30pm on 11th September, Royal London will be hosting a live show as part of Pension Awareness Week, to help you get prepared for your retirement.  

To sign up, head to the Pension Awareness website: https://pensionawarenessday.com/ 

As you approach retirement Financial Advice can play an important role in achieving your goals. In our latest video, Investment Director Alan Cram and Head of Pensions Nigel Swan discuss ‘The importance of Financial Advice as you reach retirement’

If you are looking to start planning your retirement, get in touch with us today

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Free guide: saving for retirement

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How you invest in your 50s could significantly impact your quality of life in retirement. While there still is time to increase your retirement savings, a seemingly simple mistake could derail your plans. This is where obtaining professional financial advice becomes crucial.

With retirement now in sight, as you approach this milestone, ensuring your money works effectively will allow you to enjoy retirement on your own terms.

We have produced a free guide ‘How much do I need to save for retirement?’ which is available to download here:

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The importance of Financial Advice as you reach retirement

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At Retirement – a financial adviser will help you understand crucial options 

As you reach retirement age, a financial adviser will explain all the options available to you including 

  • A secured/guaranteed income approach 
  • A flexible/access approach 
  • Staging key financial decisions throughout your retirement 
  • Identifying any lifestyle gaps 

Your adviser’s role is to take the retirement worries away and be your go-to expert for all your financial questions and concerns.

Find Your Local Adviser

How much do I need to save for retirement?

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Ensure your money works effectively to enjoy retirement on your own terms.

How you invest in your 50s could significantly impact your quality of life in retirement. While there still is time to increase your retirement savings, a seemingly simple mistake could derail your plans. This is where obtaining professional financial advice becomes crucial.

With retirement now in sight, as you approach this milestone, ensuring your money works effectively will allow you to enjoy retirement on your own terms.

Clarify your Goals

‘Saving enough for retirement’ has likely been on your list of financial goals for some time, but now is the moment to become more specific. Knowing exactly how much you need to save will give you a concrete target. This amount will depend on factors such as your intended retirement age, your retirement plans, projected investment growth and inflation.

A financial adviser can demonstrate how long your savings may last in retirement, helping you understand if you need to adjust your goals or savings habits.

Review your Investment Portfolio

When you are in your 50s and nearing retirement, ensuring that your investment portfolio maintains a suitable balance between risk and reward is important. The right level of investment risk depends on how you intend to fund your retirement and how far away your target retirement date is.

For those planning to buy an annuity in a few years, moving your pension fund from stocks to lower-risk assets such as cash may be wise. This strategy helps protect your pension pot from potential stock market crashes just before you need it.

Maintain Growth Potential with Diversified Assets

If you plan to fund your retirement through income drawdown or other savings and investments, moving into cash too early could mean your money does not last as long as required. Retaining some exposure to stocks allows your portfolio the opportunity for long- term growth. Considering that your retirement could span several decades, inflation will inevitably erode the real value of your savings and reduce your purchasing power.

One way to mitigate the impact of rising prices is to remain invested in the stock market. Historical data shows that the stock market generally outperforms cash over long periods and exceeds the inflation rate. Diversifying your investments across various asset classes can help your portfolio withstand stock market fluctuations.

Focus on your Pension

Pensions are an exceptionally efficient method of saving for retirement, particularly when you’re in your 50s.This is largely due to the tax relief you receive on personal pension contributions. For instance, a £1,000 pension contribution costs just £800 if you’re a basic rate taxpayer, £600 if you’re a higher rate taxpayer or £550 if you’re an additional rate taxpayer. Tax relief is essentially free money from the Government, significantly enhancing your retirement savings.

Most individuals can contribute up to 100% of their UK relevant earnings or £60,000, or £3,600 if there are no relevant earnings (whichever is lower) into pensions yearly while still benefiting from tax relief until age 75. However, it is important to remember that your pension annual allowance could be lower if you have a very high income or have triggered the MPAA.

Maximising Unused Allowances

If you wish to save more than your annual allowance, it might be possible to maximise unused allowances from the previous three tax years under carry-forward rules. This strategy can considerably enhance your retirement savings by utilising every available tax benefit.

Make the most of your Tax Allowances

There are numerous other tax allowances investors can utilise. For instance, you can invest up to £20,000 (tax year 2024/25) into Individual Savings Accounts (ISAS) to benefit from tax- efficient income and growth.

You can withdraw money from ISAs whenever you desire without incurring any tax; this makes ISAs a useful source of income for those retiring before age 55 (the current earliest age at which you can access your pension subject to health and certain occupations). Additionally, ISAs form an integral part of a tax-efficient retirement income portfolio.

Other Allowances to Consider

Other allowances include the personal savings allowance, dividend allowance and Capital Gains Tax exemption. You can earn up to £1,000 a year in interest without paying tax if you’re a basic rate taxpayer. If you are a higher rate taxpayer, you can earn £500 a year without paying taxes. Additional rate taxpayers don’t receive any allowance at all.

The annual Capital Gains Tax-exempt amount from 6 April 2024 is £3,000. If the total of all gains and losses in the tax year fall within this exempt amount, no tax will be payable. Gains above the annual exemption will be taxable. The exempt amount cannot be carried back or forward. The unused amount is lost if it’s not used, in part or full.

Time to optimise your pension and make the most of available tax allowances?

Please contact us for more detailed advice on optimising your pension and making the most of available tax allowances. We are ready to help you navigate the complexities of retirement planning and ensure you achieve a financially secure and comfortable retirement.

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Only two-fifths of Britons know how to boost their pension

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How much money will you have for retirement, where it’s invested, and what are you being charged?

According to new research[1], just two-fifths (42%) of the UK population know how to contribute more to their pension. The study also found that a quarter of those with multiple pots would not know where to start consolidating multiple pension pots accrued throughout their working life.

The Financial Conduct Authority (FCA) Financial Lives Survey reported that 47% have not reviewed how much their pension pot is worth in the last 12 months. Pension saving can seem complicated and inaccessible for many people, but we should all be doing it as soon as we start working.

Understanding Pension Consolidation

Pension consolidation is a process that can gather up your previous pensions and bring them together. As you move from job to job and change addresses, it can be tricky to manage pensions. With every new one, there’s more admin to deal with.

By combining them, you can have a clearer view of how much money you have for retirement, where it’s invested, and what you’re being charged. This consolidation can simplify your financial landscape.

It’s important to remember that a pension is an investment. Its value can go down as well as up and could be worth less than what was paid in. Pension consolidation won’t be right for everyone.

Managing Your Retirement Savings

Gathering up your pensions could give you a better idea of your overall pension pot and what it could be worth when it’s time to retire. Lower charges are another benefit; you could potentially save on management fees, which can help your pension pot grow faster.

The more pensions you have, the harder it can be to track them and how they’re performing for you. With just one pension, managing your retirement savings becomes much easier.

 

Simplifying Your Financial Future

Consolidating your pensions can provide peace of mind by offering a straightforward overview of your retirement funds. This reduces the administrative burden and makes making informed decisions about your financial future easier.

It’s crucial to stay informed about the value of your pension pot and the different options available to boost your retirement savings.

Taking proactive steps now can ensure a more secure and comfortable retirement.

 

Role of Professional Financial Advice

Obtaining professional financial advice is invaluable when considering pension consolidation. We can provide tailored recommendations based on your unique

circumstances and long-term goals. We’ll help you navigate the complexities of pension schemes and select the right options for consolidating your pensions effectively.

Engaging with us also ensures that you are making well-informed decisions, maximising the potential of your pension savings, and preparing for a financially stable retirement.

At any stage in your career, you may want to determine precisely how much you have saved in your pension and begin managing these funds more effectively. If you require further information on consolidating your pensions or need assistance understanding your options, please contact us for more detailed guidance.

Find Your Local Adviser

Source data:

[1] Lloyds Bank research 09.05.24

 

 

Financial advice when planning retirement

 1024 573 Jess Easby
By:

People who are confident about their retirement are most likely to have specific retirement goals and know what steps they need to take to reach them. But sadly, we see many people do not feel confident that they will have enough savings to live comfortably after they retire.

Many people have a fear of outliving their money, but most don’t have a clear idea of how much money they need during retirement. It’s important to remember that retirement doesn’t happen at a certain age, it happens when you have enough money to live on.

Seeking professional financial advice can help create a clear direction and understanding which will give you peace of mind that you are on the right track.

If you’d like to discuss your retirement, and would like to speak to an expert Financial Adviser, please get in touch:

Find Your Local Adviser

Planning for an early retirement  

 1024 683 Jess Easby
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Living life to the fullest and accomplishing long-held dreams. 

It’s common for individuals to either overestimate or underestimate their lifespan. As average life expectancy gets longer, some people may spend over 20 years or more in retirement. 

Early retirement typically signifies reaching financial autonomy before the statutory pension age, usually in the mid-60s. In the United Kingdom, retirees can begin drawing their State Pension at age 66. However, this retirement benchmark is set to increase to age 67 by 6 April 2028. 

Consequently, the early retirement age could be anywhere in your early 60s. Yet, for most, the concept of early retirement begins at age 55, when individuals can start drawing on their personal or workplace pension savings. However, this age is also due to increase to 57 from 6 April 2028. 

Aspects of Life 

During the early retirement phase, the focus tends to be on living life to the fullest and accomplishing long-held dreams. One’s spending might then reduce as activity levels decline, only to surge again later, possibly due to rising care needs. 

It’s common for individuals to either overestimate their health or underestimate their lifespan. As average life expectancy gets longer, some people may spend over 20 years or more in retirement – over twice our grandparents’ duration. Yet, as with many aspects of life, this depends on luck. 

Complex Calculation 

In fundamental terms, full retirement implies that your lifetime expenses should not surpass your income plus any remaining assets, such as savings and investments. This can be a complex calculation in many instances. It will require you to weigh your pension and other income sources against your expenditure and evolving needs as you age. 

Simultaneously, it’s crucial to consider investment returns and inflation, which refers to the rising cost of living. As we have recently witnessed, everyday prices can escalate rapidly, significantly diminishing the purchasing power of a fixed income or cash savings. 

Multiple Factors 

Embracing early retirement doesn’t necessarily translate to a full-stop on professional life. Instead, many individuals transition into more flexible, part-time roles or switch towards volunteering. This shift allows retirees to sidestep less appealing aspects of working life, such as long commutes or stressful work environments while reaping employment benefits. 

Unfortunately, early retirement due to ill health isn’t a choice but a necessity, creating unique challenges for some. Time constraints limit opportunities to plan and build retirement finances. Additionally, careful planning for care and support becomes a priority. Making the decision to retire early is significant and requires thorough consideration of multiple factors. 

To determine whether you can retire early, you will need to assess your financial standing. This means calculating your total pension pots, tracking lost ones and considering other possible income sources or debts. Additionally, you need to envision your ideal early retirement lifestyle and estimate its costs. 

Assessing your Financial Health 

To begin, you need to calculate your total pension pots. This includes private or workplace pensions and any final salary pensions you might have. If you’re considering early retirement, remember that the State Pension won’t be included in this income. 

Reclaiming Lost Pensions 

It’s not uncommon to lose track of pensions over time. The government’s free Pension Tracing Service can assist if you suspect a missing pension but lack any supporting information. Visit their gov.uk website or phone them on 0345 600 2537. Consolidating your pensions might also be a sensible strategy. 

Understanding your State Pension 

Check up on your State Pension to understand how much you’ll receive and when the payments will start. This is crucial for your overall retirement planning. 

Identifying Additional Income Sources 

Consider other potential income sources after retirement. This could include savings and investments, property ownership, or even starting a part-time job or your own business. 

Managing Debts and Loans 

Take stock of any outstanding debts or loans. Consolidating them could potentially expedite their clearance. Set a specific date to pay them off entirely. 

Estimating Retirement Income 

We can help you estimate your retirement income and offer valuable insights into your financial future. 

Envisioning Your Retirement Lifestyle 

Next, plan your essential retirement spending by mapping out mortgage repayments, utility bills and other necessary expenses. Then, envision your ideal retirement lifestyle. What do you want your life to look like once you’ve retired? How much will it cost? 

Factoring in Responsibilities 

Consider any responsibilities that might impact your retirement plans. Will your children still be dependent on you? Might you need to care for older parents or relatives? Are there any other responsibilities you should bear in mind? 

Deciding Where To Live 

Housing decisions are a crucial part of retirement planning. Do you want to stay in the same house, release equity with a lifetime mortgage, move somewhere new, downsize and release some money, or even move to a cheaper region and upscale? 

Estimate Retirement Spending 

Finally, combine all the above factors to estimate your total retirement spending. There’s a lot to consider here. But as you work through it, you might realise that you’re more prepared to retire early than you initially thought. 

If you are considering early retirement and would like professional retirement advice, please get in touch:

Find Your Local Adviser