Retirement planning can be a very time consuming and complex process. Decisions made at retirement can be irrevocable and affect how you live the rest of your life so it is important that you consider all of your options first.
At Four Wealth Management, our financial advisers help a lot of clients to prepare for retirement by working with them to define their goals at retirement and creating a bespoke retirement plan tailored to the client’s individual needs to provide them with peace of mind knowing that everything is in order.
How to prepare for retirement
Below are some steps to take before you retire.
Calculate your likely retirement income
It is possible that you have multiple pensions with different providers, particularly if you have had more than one job in your life and started a new pension at each workplace. You can use the government’s pension tracing service to locate your pensions. You should then request valuations of your pension pots so you can calculate the total you have already saved for retirement.
At Four Wealth Management, we can help you to review your pensions to determine whether they are still working hard for you and on track to meet your retirement goals and then explain all of the options available to you regarding these pensions.
Create a budget for retirement
Once you know how much money you have already saved for your retirement you should look at your current expenditure. It is important to remember that your retirement could last 20 years or more.
You should cut any unnecessary expenses before retiring.
If you have a shortfall between your predicted monthly income from your pension and your outgoings, an adviser at Four Wealth Management can help you.
Do not take risks with the pension savings you have built up
People often choose higher-risk investments to invest in when they are young and starting to save for their pension as they are saving for the long-term. However, as you are approaching retirement, it is important that you review your pension investments and reduce risk with the aim of making sure that your income at retirement is more stable.
At Four Wealth Management, our Financial Advisers will review your pension portfolio annually to help keep it on track to reach your retirement goals and is in line with your attitude to risk.
Clear your debts before you retire
Outstanding debt will affect the age that you can retire.
Before you retire, you should try to reduce or completely eliminate any debt you have. This is because you will have less income when you retire. Reducing debt beforehand will reduce your outgoings and mean you need to draw less income from your pension.
This means you are less likely to exhaust your pension fund too early and possibly run out of money at retirement. It is important to remember that your retirement could last 20 years or more.
When you are looking to reduce your debt, you should focus on paying off high interest debt first.
Your biggest debt is likely to be your mortgage, if you still have a few years left on your mortgage, you could overpay each month in order to pay off your house sooner. Alternatively, you could downsize your house. Once your mortgage is paid off, you are likely to have more income that you can contribute to your pension pot before you retire.
Consider ways to boost your pension
A pension is one of the most tax-efficient ways that you can save for the future. Even if you are planning to retire in the next few years there are still many ways you can potentially increase the value of your pension pot so you can have more money when you choose to retire.
For example, after you evaluate your current expenditure, any money you can save by reducing your outgoings could be put into your pension until you retire.
Any pension contributions you make qualify for tax relief of up to 45% from the government depending on your earnings. Basic tax relief of 20% will be automatically added, if you are a higher rate tax payer you must claim additional relief through your annual tax return.
Decide when to start taking your pension
Working longer and continuing to contribute to your pension for a longer period will give your pension pot more time to potentially grow.
For many people, the goal is to retire as early as possible, however it is important that you work out how long your pension pot will last for before you decide when to retire.
At Four Wealth Management, your Financial Adviser will work with you to determine the best age for you to retire to help make sure you do not run out of money at retirement.
Get advice and finalise your decisions
Taking Financial Advice when planning your retirement could be invaluable and give you peace of mind knowing the decisions you make are suitable for your circumstances.
At Four Wealth Management, any advice you receive is guaranteed to be suitable for your circumstances by the St. James’s Place Wealth Management guarantee.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.