Financial Planning, Pensions Advice, Financial Adviser Dunfermline, Fife, Edinburgh and Central Scotland

Friday 13th December 2019

Planning your retirement can be a challenge. There are multiple areas to think about and you may not have a clear idea of what you want it to look like. However, whilst putting off planning until the retirement date arrives might seem attractive, it can mean missing out. Taking a proactive approach in the run-up to retirement can provide focus.

If you’re at a loss about where to start with retirement planning, bringing the spotlight back to you should be your first step. There’s no single type of retirement that suits everyone. A key part of your planning should be about understanding what your ideal retirement looks like and building a fulfilling lifestyle once you give up work. Over the last few decades, work has probably played a significant role in your life and it can be daunting to step away from that and embrace the freedom retirement offers.

The five questions below can help you start to think about the type of retirement that you’ll want to look forward to.

1. When do you want to retire?

The first thing to set out is when you want to retire. For some, retiring as soon as possible is the dream, but others will want to work well past the traditional retirement age. You don’t have to set a date in stone if you’re unsure. However, having a rough idea of when you’d like to embark on retirement means you can make informed decisions. As well as your personal outlook, your job and the flexibility it affords will play a role too. If you were to carry on working for another ten years, would adjustments need to be made, for example?

Remember, the State Pension age is now gradually rising for both men and women. If you’ll rely on the State Pension to supplement other sources of income, be sure to check when you can start claiming it.

2. Would you like to take a phased approach to retirement?

Does the thought of giving up work completely worry you? You’re not alone, more retirees are choosing a phased approach. This may mean cutting down your hours at an existing position or looking for a new job that will provide you with more flexibility. Phased retirement may be the right choice for you if you don’t feel quite ready to jump into retirement. Work offers numerous benefits, such as social life and keeping your mind active, that you may still want to hold on to whilst enjoying some freedom. Phased retirement can also enhance your income and help preserve pensions and other provisions you may have made.

3. Do you plan to make any one-off purchases to kick-start retirement?

When we first start to think about retiring, it’s often those big one-off plans that our attention is drawn to. Do you hope to begin retirement with a once in a lifetime holiday? Or, perhaps you’ve been thinking about renovating your home once you have more time on your hands? This is a time to celebrate the next chapter of your life and you may want to mark the occasion with a grand gesture, now is the perfect time to think about what you’d like.

4. How will you fill your time day-to-day?

Whilst the above point is often the focus, the day-to-day is just as important too. What’s important to your life now or driving your decision to retire? It may be a desire to travel the world, spend more time with loved ones or focus on a hobby that you’ve not been able to dedicate as much time as you’d like. Without work, how will you spend your time? Whilst you might simply plan to spend more time at the golf range or relaxing, without plans it can become dull quickly. Thinking of several hobbies, aspirations and passions you can pursue in retirement can create a lifestyle that’s enjoyable and fulfilling.

5. Do you want to move or stay where you are?

Finally, it’s time to think about where you’d like to spend retirement. You may be comfortable in your own home. If this is the case now is an excellent time to think about whether any adaptions would be needed to ensure it’s suitable throughout retirement. Alternatively, you may have plans to downsize, move closer to family or even take the plunge to live abroad. Whatever your plans, you should consider how they’ll affect the lifestyle that you want to achieve.

Taking a look at your retirement finances

Setting out the retirement lifestyle you want is important. However, so is ensuring it’s realistic and in line with your financial provisions. Taking the time to review your retirement finances can help you see where adjustments may need to be made or where you can think even bigger.

When people start looking at all the sources of income open to them in retirement, such as pensions and savings, many find they’re in a better position than they first suspected. As a result, they may choose to expand plans, help family or simply proceed with confidence about their financial situation. Of course, some planning for retirement may find there’s a shortfall. If this is the case, don’t panic. Realising there’s a gap in your finances before reaching retirement means you’re in a position to make changes where necessary or look at alternative sources of income.

Calculating income in retirement and understanding a sustainable level to access assets can be complex. This is an area we’re happy to help you with. We work with a range of clients planning for retirement to help them understand what they want to achieve and how assets will allow them to do so.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.