What more do you need to know about retirement planning?
The concept of retirement is changing…
With more flexible pensions and the UK population living longer than ever, planning for retirement is becoming even more critical.
It will ensure you’re on track to a financially secure future and give you more choice and greater control over your eventual income.
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To make you aware of what it involves, here’s everything you need to know about retirement planning:
What is retirement?
Retirement is when a person stops working for good due to age, financial security, and/or illness. Your retirement age will generally depend on the type of pension you choose and your financial needs, but it is usually between 65 and 70.
What does retirement planning involve?
Planning for retirement involves organizing a set income for when you cannot work.
This could be done by claiming a State Pension—although it’s worth remembering that this may not be enough.
That’s why many people choose to make funds available by paying into a Personal or Workplace Pension, which will add to their retirement fund over several years.
Why should I plan for my retirement? Planning for retirement is a great way to prepare for the future, ensure financial stability, and live the lifestyle you want—even when you’re no longer earning.
The earlier you do it, the more manageable it will be and the less impact it will have on your finances in the build-up to retirement.
What are my options?
Here’s a quick rundown of your pension options and what they mean:
State Pension – this is a regular payment given by the government to which anyone who has paid National Insurance contributions is entitled. Your amount will vary depending on your primary or the new State Pension eligibility.
Personal Pension: This type of pension allows you to choose a pension provider and invest money, which is then accumulated into an eventual retirement fund.
Workplace Pension – your employer arranges this and invests a percentage of your pay into the pension scheme every month. You’ll usually get some kind of tax relief from the government, and your employer will also add money to the scheme.
Even if you choose to get a Personal and/or Workplace Pension, you’ll still be entitled to receive a State Pension.
Retirement Checklist
1. Understand your options
2. Work out what your pension could provide
3. Picture your lifestyle and your income needs.
4. Review how your spending habits might change
5. Decide your plan for your residence.
6. Check your state pension entitlements
7. Explore the options for providing for others.
8. Increase your pension pot.
9. Get financial advice or independence advice
When should I begin planning for my retirement?
Still not sure where to start? Here’s a more detailed timeline of what you’ll need to prepare for and when
Ten years before…
Although retirement might seem a long way off at this stage, it’s still worth considering what you want your life to be like when you get there.
Here are some things to think about when you build your plan:
• The age you’d like to retire
• How much money you’ll need when you retire, and how much you’ll have in your fund
•Any savings, bonds, or other assets that you could add to your retirement income
•How you’ll pay for travel, hobbies, or further education once you’ve retired
• A backup savings fund to help with any unexpected costs like car or home repairs
• Get rid of any debts before you retire
•How can you help your dependents once you’ve retired
•Keeping money aside to pay for long-term care for you, your partner, or other dependents
Five years before…
Now is the time to make sure your goals are on track by putting some tangible actions in place:
•Think about the age at which you want to leave the job for good.
• Consider timing your retirement and continuing to work part-time
•Enhance your pension by making more payments and/or adding mass payments (take advantage of any unused pension tax allowance)
•Search for any lost pensions through the Pension Tracing Service
• Request updated information on all your pensions. Get a forecast of your State Pension at gov. uk
• Look over your investments and savings as you get closer to retirement
•Decide whether you’d like to take an income from your pension or whether you want a lump sum, including any tax-free allowance, to do something different when you retire
• Discuss your options with a financial adviser, talk to family and friends, or seek free and impartial guidance from Pension Wise (if you’re over 50)
• Write or review your Will and plan what will happen to your pension and estate, bearing in mind the tax implications
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