While the transition into retirement can be an exciting time for people, it can also be a stressful period. Many people are concerned about managing their money, getting bored or lonely and missing the social aspects of working life.
Consider phasing into retirement
It is a big adjustment to go from working full time to not working at all. Therefore, phasing into retirement may be more suitable for you by gradually reducing the amount of hours you work. This allows you to experience what retirement will be like by having more free time but still providing you with structure you are accustomed to.
Phasing into retirement also gives you time to adjust to a lower income. While working less hours, you should probably try to avoid drawing income from your pension, this will give your pension pot more time to potentially grow and you can continue to contribute to your pension while working part time.
Many employers allow employees to change from full time contracts to part time, however if you find you are unable to do so in your current role you could consider changing your job or working from home.
How do you financially plan for retirement?
At Four Wealth Management, we work with many clients on easing into retirement and prepare them for the financial adjustments. Having a lower income may mean that you need to make lifestyle changes, which could include reducing your expenditure or downsizing your house. Your adviser will be able to determine if these are necessary steps for you before you retire.
You may be used to saving into your pension monthly and seeing the value increase over time. When you retire, you will start drawing income from your pension pot and start seeing your pot decrease. Changing your mind set from saving money to spending money will take time.
Calculating your retirement income plan
It is important to establish your retirement income plan before you retire. If you retire at 65, there is a possibility you may spend over 20 years in retirement. Your adviser will work with you to determine a budget for you when you retire to help you have a comfortable lifestyle. When you retire, your finances are likely to be relatively fixed so you need to work out how much you are planning to spend and when you will be spending it. It is also important to consider that your spending levels may change during the course of your retirement; you may spend more when you first retire, for example if you choose to go traveling. You should also consider potentially spending more on healthcare as you get older.
Many people are unable to live a comfortable retirement on the state pension alone and need to use their personal pension or other forms of income to supplement this. Depending on what type of pension you have, your pension pot may generate enough income from dividends and interest, or you may need to occasionally sell assets to ensure you have enough income. Your adviser will assess your income needs and develop a rebalancing strategy so you can determine which assets to sell and when. Where possible, some retirees choose to receive income from their pension at the same frequency as they received their pay while working.
Consider consolidating savings and bank accounts prior to retirement
The transition to retirement is also a good time to consolidate your savings and bank accounts in order to simplify your money management. This will make it easier for you to monitor the amount of fees you are paying and keep track of your money.
Transition effortlessly into retirement with Four Wealth Management
Creating a retirement plan before beginning the transition to retirement will make the transition easier and less stressful for you.
