Have you started thinking about when you would like to retire? The earlier you start planning for retirement, the more control you hold over your financial future.
Whether retirement is in the distant future, or only a short time away, the sooner your start planning for retirement, the more likely you will achieve the retirement you want.
Planning for retirement can start as early as your first job and making your first payment into a company pension scheme. Or it could start a little later. Whatever stage of life you are at, it’s a good idea to take financial advice to support making plans for retirement, as this could affect your financial future.
What is your retirement income made up of?
When planning for retirement, it is a good idea to have a good understanding of what your retirement income could be made up of. For many, this could be a combination of a State Pension, Personal and Workplace Pensions and any savings and investments you may hold.
State Pension – It is a good idea to check online to see what State Pension you may receive. Your State Pension is based on your National Insurance contributions. The earlier you go online, the earlier you can check the details and ensure you will be receiving the right amount. There are different factors which may affect the amount you receive. However, there may be options to capitalise national insurance contributions to increase your State Pension.
Personal Pensions – Many individuals make the decision to open a Personal Pension. A defined contribution pension where you have had the opportunity to choose the pension provider and the amount you wish to contribute. There can be great flexibility to choose where your contributions are invested. This is an especially popular option for those who are self-employed or don’t have a Workplace Pension. With tax relief available at both basic rate and higher rate, these can be highly valuable to the holder.
Workplace Pensions – Workplace Pensions come in various packages. Defined contributions pensions which offer a pension based on what was paid in. Or, a defined benefit scheme which offers a pension based on your salary and how long you have worked for that employer. Some Workplace Pensions are called occupational, company or work pensions. These pensions work by a percentage of your salary being put directly into the pension scheme automatically on every payday. In most cases, your employer will also contribute money into the pension scheme.
Savings and Investments – Not a specific pension. But having savings and investments that have been earmarked for the future can offer a similar income structure to a pension scheme.
Lost Pensions – There are a number of services available to help you track lost pensions. When planning for retirement, it is helpful to try obtain all your pension information as early as possible as you may choose to consolidate some of your pensions.
Your retirement income will be made up of one or more of the above types of pensions. Some of these pensions will offer you a definitive pension amount, whereas others, when managed effectively, can offer significant returns towards your retirement.
What do you want your retirement income to be?
The earlier you start planning for retirement, the more likely you can achieve the retirement you desire. If you are a significant amount of time from retirement, you have a greater opportunity to achieve the retirement income you desire. From increasing your Workplace Pension contributions to setting up a Personal Pension or even utilising savings and investment funds. For those a little closer to retirement age, there are ways to boost your pension. Effectively these are paying more in to your pension pot or putting back the date you start taking money from it.
Having specific financial goals in mind will help you make the most appropriate decisions now. It will dictate whether you need to pay more in to your pension pot, ensuring you are allocating your funds to the best place to ensure the best growth and tax efficiency. Or it could dictate the date that you retire at. For some people this might mean delaying retirement. For some, it can allow for an earlier retirement than previously expected or planned for.
Will you have any debts entering retirement?
It is essential to know what debts you may have entering retirement. In an ideal world, you will enter retirement with no debts. This could include mortgages, credit cards or personal loans. Additionally, this could include financial commitments you have made prior to retirement. I.e. have you committed to paying children or grandchildren’s education costs?
When entering retirement, your income is likely to reduce. Often outgoing costs will remain the same. By planning for retirement, you will be ensuring you have the relevant means of paying for these debts and commitments. You can feel assured that retirement will not come with any additional worry or concern. Having debts and financial commitments ahead of and during retirement is by no means a negative. However, it is an essential consideration to ensure you have the retirement you desire.
What will your retirement income be?
This is an extremely common question heard by Financial Advisers, however greatly important. And depending on your stage of life and how near you are to retirement, the answer could vary considerably. In very general statement, we would hope for your retirement income to be what you wish it to be. However, the factors mentioned above will all have significant impact on your retirement income. When planning your retirement, it is essential to consider what your needs and requirements are, as well as your wants and wishes.
Obtaining Financial Advice to help in planning for retirement
There are numerous reasons that obtaining financial advice is beneficial when planning for retirement. With many benefits discussed in a previous article, What is the Purpose of a Financial Adviser. By taking financial advice when planning for retirement, you will be in receipt of the following benefits:
- A professional service – With decades of experience in delivering advice tailored specifically at supporting clients achieve the retirement they desire. Financial Advisers provide relevant and bespoke financial advice which is tailored to each individual. This takes in to consideration, the retirement income desired, any debts or previous financial commitments as well as timescales for retirement.
- A time saving service – Our lives are filled with all sorts of nonnegotiable commitments; working, commuting, sleeping, cooking, exercise as well as time spent with family. This simply does not leave the majority of people the appropriate amount of time required to conduct the relevant research in to the pension solutions which they require.
- Eradicating emotional decision making – When considering what type of retirement you would like, you are often hard wired to make decision based on emotions and gut feelings. A Financial Adviser will take the emotional side out of the decision-making process. Ensuring that the planning for your retirement is done in line with your needs and requirements. And always in your best interest.
Whatever stage of life you are at, it is never too late to start planning for retirement. Particularly with the support of your Financial Adviser, you will have more control over your financial future.