Many working people in the UK look forward to the day they can retire. With more time to spend with the people they care about and to undertake personal passions and pursuits, retirement can be an exciting time where you enjoy all you have worked for.
However, to optimise your experience, it is vital that you put retirement plans in place. Having time on your hands is never good when your mind is preoccupied with pressing financial issues and fear of affording retirement.
While retirement planning continues even after you stop working to meet your changing needs, it starts with the pre-retirement planning process. In this in-depth article, we’ll provide information on what areas you should turn your attention to prepare.
How to estimate retirement expenses
You may need to adapt to a different income and spending pattern in retirement depending on how much money you can access, but without a monthly wage, most people must live on less.
To prepare and plan, budgeting for retirement is key. Split costs into two lists: essential and non-essential. Essential expenditure is the money necessary to cover basic living requirements like housing, utilities and groceries. Non-essential expenses involve holidays, dining out and leisure activities.
Assess your pensions
Pensions can play an important role in your retirement income. Start by getting an up-to-date State Pension forecast on the Government’s website. This can provide you with an estimate of what you’ll receive in retirement and is based on your National Insurance (NI) contributions.
Do you have a defined benefit pension? If so, consult your provider to receive a retirement quote. The pension will usually start paying you a fixed income from retirement age. This is often at age 60 or at 65, but schemes can vary. How much you get depends on your length of service and salary.
If you possess a defined contribution pension, you will have accumulated a pension pot that you can usually access from age 55. Money can be used as lump sums or to generate income.
Consider ways to boost your pension
If you find you are nearing retirement and likely to retire with less than you need, you can still increase your pension pot. Two ways are to pay more in or delay the date you begin withdrawing money from it. This enables you to increase how much you’ll have in retirement and reduce the overall amount needed with a shorter retirement.
You can also look for gaps and make voluntary contributions to your State Pension to fill them.
Diversify your investments
Investments can help you generate income in retirement, but a diversified portfolio is essential. Including a variety of asset classes such as portfolios can balance risk and can be tailored to meet specific aims.
Calculate how much you need for retirement and create a retirement budget
With an understanding of your basic needs and lifestyle choices you can start to calculate costs. You’ll also need to consider the length of your retirement and account for additional expenses.
Retirement has three main stages, and each have different costs. You’ll typically spend more in early retirement when you’re more active, with a slower expenditure in the second stage. In the third stage, you’ll need to account for the cost of healthcare and support. Now, add up your available pensions, savings and investments to work out your income in retirement, and allocate it properly in a budget for the three stages of your retirement.
Change your retirement age and benefit
If you can afford an early retirement, this allows you to start enjoying your free time and money sooner. However, there are benefits to working longer. By continuing to earn annually, you can preserve your assets and even increase them, allowing them to go further in the future.
Update your estate
To ensure that your estate is passed on properly according to your wishes and that those you leave behind are well looked after, planning is important. Experts in estate planning in Cheshire and other counties can help you pass on your wealth in a tax effective way so that more is provided to your beneficiaries.
Do you need assistance with retirement planning Cheshire and Oswestry?
At Hartey Wealth Management, we offer holistic financial advice that covers estate and retirement planning, as well as investments, tax planning and savings advice. This means we are ideally placed to provide a comprehensive service that helps people prepare for their retirement. Reach out to our expert team of advisers today to overhaul your existing retirement plan or put one in place for the first time.
