Taking the Time to Think About Your Financial Future – Top Tips for Pension Planning
Did you know that on average, retirement is set to last at least two decades? We’re living longer, which is a great thing – but it also means that we need to make our money last longer than ever.
You might have taken out a pension years ago, but don’t pay much attention to it. Or maybe you haven’t even thought about planning for retirement yet – and putting it off seems like the more comfortable option.
But by taking some time to consider your pension, your financial future could become much more secure. Even if you’re not far off retirement (hooray!), you’ve still got time to increase your retirement income. Here are our top 10 tips to ensure a healthy pension pot:
Look at what you already have
Gather current statements from any pension scheme providers, and work out which are defined benefit (final salary) and which are defined contribution (personal pension).
Think about where you’ll live when you retire
Will you live where you live now, or will you be relocating to a different area, or even abroad? Might you live closer to family, move in with them or downsize? These are all things to consider, and planning your living situation early can help you to decide what kind of budget you’ll require and figure out if you need to release equity.
Consider at what age you’ll be finishing work
If you’re 50 today, you’ll receive a State Pension at the age of 67. Will you continue to work full-time until this point? Or are you able to retire early or reduce your hours until you turn 67?
Work out how much money you’ll need
Begin keeping a record of how much you spend every month, including holidays and eating out. Then, try to work out how much you’ll be spending once you’ve retired – will you have paid off the mortgage and will you be saving on commuting costs?
Start paying more into your pension if you need to
The flat rate for State Pension is £164 per week or £8,546 per annum – will this cover your costs? Put your details into a pension calculator and see if there is a gap, and if there is, consider paying more into your pension until you retire. Most people do have a gap, so don’t be worried about this! By making a change now, you’ll be able to make a positive difference.
Take your loved ones into account
If you’re married, you should work out your joint retirement income. You also need to tell your pension schemes who should benefit in the event of your death – this could be a tax-free lump sum or a reduced pension.
Check on your pension regularly
Retirement planning should ideally start at age 50 at the latest. It’s essential to pay regular attention to it and check it at least once a year. Consolidating pensions could make it easier to keep track, but remember to take advice before doing so.
Do you want flexibility, security, or both in retirement?
Pensions have become very flexible in recent years. You have the option to buy an annuity for secure lifetime income, keep your pension invested and draw down an income, combine the 2, or cash in completely. Try to figure out what’s best for you.
Make the right investments
Your focus may change from looking for growth in your pension, to merely securing what you’ve built up. If you plan to keep your pension fund invested and draw down an income, the investment period may well be over 30 years.
Consider your other finances
While planning for your retirement is essential, don’t neglect your other financial issues. It’s important to pay down debt, help the kids and help out family members if needs be – balance your ambitions.
If you’re concerned about your financial future, get in touch with Cowens Financial Architects. We’ve got over 25 years experience in financial planning and can work with you to identify your personal and financial goals – as well as offering solutions to help you achieve them.