It used to be the case that many people worked in the same company or organisation for many decades, and then retired with a generous pension. Those days are long gone!
Today, final salary pension schemes have been steadily replaced with defined contribution schemes, people are living longer, workers have more diverse careers and the state pension cannot be relied upon to fully cover your living costs in retirement.
As a result, it’s important that you plan ahead for your retirement. It is never too early to start preparing – in fact, the earlier the better. Generally speaking, if you start saving in your twenties you will have much more in your pension pot compared to someone who started saving the same amount from the age of thirty. So we always encourage people to plan well ahead!
Yet perhaps you are just on the cusp of retirement, perhaps leaving work as early as a year from now. What preparations can you make for life after work?
Here are eight questions to ask yourself as you approach this new chapter of your life:
#1 Review your goals
If you have been planning ahead (possibly with the help of a financial planner), then you should already have an idea of your retirement goals, as well as your income and expenses.
Even so, it’s worth taking stock and reviewing how you really feel about things. Are you sure you want to retire, or do you perhaps feel that you’d rather “phase into it” by moving to part-time work? Do you really want to retire next year, or would you be happy and able to push it back another year or two?
Or, perhaps you are ready and happy to retire. Maybe you cannot wait! Regardless of your plans and how you feel, it’s always a good idea to check yourself and be sure that you are on the course that your heart is truly set on.
#2 Reassess your finances
It could be that you did an assessment of your projected retirement income and expenditure a few years ago. However, it is quite possible that things have changed in that space of time.
Perhaps the house is not fully paid off, as you hoped it would be by now. Or, perhaps you have a new, unexpected financial liability to pay for.
Whatever the case may be, it could be a good idea to sit down with a financial adviser and double-check that your financial plan is still on track, or if a new budget and different strategies are required in light of new circumstances.
#3 Think about lump sums
For those with a defined contribution pension, usually, you are allowed to take up to 25% of the value of your pension as a tax-free lump sum when you finally retire.
Have a careful think about your current plans about this aspect of your pension. Are you planning on taking the lump sum? If so, what is it for? If you are not taking it, why not?
Regardless, it is often a good idea to have a careful think about your lump sum and make sure that your intentions match up with your financial goals.
It is quite possible that you might have accrued new debts over recent years. If so, then these need to be dealt with urgently as you approach your retirement.
A financial adviser will be able to help you identify the best options available to help you address this debt if you are in this situation. Do not allow the debt to sit there, as it will eat into your income and livelihood when you do finally stop working.
#5 Check your state pension
To receive the full new state pension, you need at least 30 years of qualifying national insurance contributions under your belt. If you are planning on retiring imminently, it is, therefore, crucial that you check that you have actually gathered up these qualifying years, or are at last on course to.
You can usually find out this information by logging into your account on the HMRC website and checking the relevant section on your national insurance contributions.
#6 Your longevity
This is a delicate subject and it isn’t nice to think about. However, your expected lifespan is a crucial part of your retirement and estate plans.
It could be that you’ve had some bad news, and you are likely not to live as long as you previously expected. Or, perhaps the converse is true. Either way, this has big implications for your income options in retirement, as well as your inheritance tax liability.
Make sure you speak with a financial adviser to ensure that you have adequately factored this area into your financial plan.
#7 Your will
Have you made a will yet? If so, then now would be a very good time to start making one!
If you do not make a will, then be aware that when you die your estate will likely be dealt with by the courts under the rules of intestacy. This will likely mean that your wealth is not distributed in exact accordance with your wishes – especially if you remarried and/or have children from a previous relationship.
#8 Your investment portfolio
When was the last time you subjected your investments to a thorough review?
If it has been a while, make sure you speak with a financial adviser to check that your portfolio reflects your financial goals as they currently stand.
It could be, for instance, that you want to re-balance your portfolio towards a more “conservative” profile, now that you have grown your wealth and want to simply enjoy it when you finally do retire next year.
So there you have it – eight practical things you can do as you conclude your final year of employment, prior to retirement.
If you would like to speak to a member of our team here at Cedar House about your plans or investment portfolio, then we’d love to hear from you. Get in touch to arrange a free, no-commitment financial consultation today.