How to Plan for Your Retirement Effectively

There’s so much to look forward to as retirement nears – escaping the 9-5, travelling with no time constraints, more time to spend with loved ones and the opportunity to find new hobbies.

But to get the most out of retirement, lots of strategic planning and emotional preparation is needed. A few years before you pack up your belongings and shut down your office computer for the last time, you’ll need to start making choices and thinking about the options you have for the future.

To help you make sure you’re ready and raring to go, we’ve compiled a simple guide to help you get started in planning for your retirement.

Planning your finances

Evaluate your retirement income

No matter what your situation, the first thing you should do is figure out how much income you’re likely to have once you retire. Here’s how to do so:

Request a State Pension statement

If you’ve made National Insurance contributions all your working life, you’ll most likely be entitled to one. You’ll receive an estimate of how much State Pension you could receive based on your NI contributions – you can request this from the GOV.UK website.

Check your most recent statements to see how much you’ll get from your defined benefit pension. You should have been sent a statement every year, but you can request a new one if it is out of date.

Add up any savings or investments

If you have any other savings, will you use them for your retirement?

Trace old or lost pensions

There is a free, government-run service, which can help you trace any lost pensions. Some commercial services charge a fee, so avoid these.

Think about boosting your pension

If you do the sums and find out you’ll be on less than you’d hoped for during your retirement, there are still things you can do to boost your pension before you retire.

You could choose to pay more into your pension while you can, and put back the date which you’ll receive it. By doing this, you’ll end up having more to retire on and decreasing the amount you need due to having a shorter retirement. Another option is to build up a balanced portfolio of investments. It’s best to talk to a financial planner to see what options are best for your circumstances.

Consider how you’ll take your pension

There are currently six ways to take your defined pension pot, according to Pension Wise. Remember that you can take out 25% of your pot tax-free:

1 – Leave it where it is

You don’t have to take any money the minute you retire. You’re entitled to leave your money invested in the pot until you actually need it. 

2 – Buy an annuity

If it’s right for you, you could use your pension pot to buy an annuity – a guaranteed income for the rest of your life.

3 – Adjustable income

Your pot could be invested to give you a regular income – but you decide how much you want to take out and when.

4 – Take your cash out in chunks

You can choose to take our smaller chunks of money from your pot until it runs out.

5 – Take it all

The best option for you could be to take your entire pot out in one go!

6 – Mix it up

If you have a bigger pension pot, you could choose to mix up your options.

Making sure you’re emotionally prepared

The best retirement doesn’t just involve healthy finances, but a healthy lifestyle and mind-set. It can be a shock to the system when you first finish work. You’ve suddenly got lots of free time to fill and a smaller social circle.

Think about what you’ll do with your free time. You might not have had much time for hobbies during your working life – so is there something you’ve always wanted to pursue? You could join a club, pick up a new sport, or start an evening class. Joining clubs and classes will also stop you feeling isolated after leaving work.

Sometimes, when people retire, they feel like they’ve lost their identity. But try to stay positive and realise you still have an important contribution to make to life and exciting times ahead, no matter how old you are. Go out and do things, keep active, travel, get a pet, volunteer abroad or at a local organisation – the possibilities are truly endless. It’s an exciting time!

If you need more help, advice or support about planning your retirement, get in touch with Cowens Financial Architects. We can work in partnership with you to identify your personal and financial goals and offer appropriate solutions to help you achieve your desired retirement lifestyle.