Planning for your retirement
Retirement planning may feature low on your list of priorities, especially if it is likely to be decades away. However, we need to be sure that we will have sufficient funds to last potentially over 40 years of retirement.
The state pension age has increased in recent years. Furthermore, this increase is set to continue, meaning people have to wait longer to claim their state pension.
When Should I Start Planning
It’s always best to start early. Someone who invests £100 a month from age 20 to 29 and then lets their investments grow is likely to have more money at 60 than someone who invests £100 a month from age 30 to 59. That means £12,000 eventually can produce more than £36,000 simply by being invested earlier.
At Henson Crisp we have many years of experience helping people to plan for, and enjoy, their retirement. Our financial advisers will coordinate a plan for you towards saving for your retirement in the most tax-efficient manner.
Approaching retirement checklist
To help you with retirement planning, here are some key questions to ask yourself.
You need to take inflation into account, but also be aware that you are likely to have fewer expenses. We will be able to help calculate your pension income and therefore the pension pot size you need to be targeting.
If you have changed jobs you may have lost track of old pension schemes. You can use the Government’s pension tracing service to help track lost pensions.
This will give you an idea of the amount currently available. You can use this as a starting point for your pension calculations. It will also help identify how much more you need to contribute for a comfortable retirement.
Private pension schemes can currently be accessed from age 55. Other schemes such as defined benefit schemes will have a Normal Retirement Age which is likely to be older.
You may have a defined benefit scheme that will pay you a set amount each year. Alternatively, you may have personal pensions with guaranteed annuity rates or a guaranteed minimum pension element.
The government website will provide you with a forecast based on your NI contributions.
A state pension forecast will help you to identify any shortfall between the state pension and your desired income in retirement.
Get valuations for your other assets such as ISAs, investments and savings. Income from an ISA is tax-free. Therefore, it may be beneficial to use some of this instead of drawing entirely from a pension.
You can shop around to find the best provider for accessing your pension. If you want a guaranteed income, you can buy an annuity. Or if you prefer, you can take lump sums and/or income from your pension fund.
In the early and middle stages of your pension, you should be looking at growing your assets. You decide the level of risk you are comfortable with. A high risk investor will be comfortable with riskier assets such as technology equities. Whereas, a low risk investor will be more comfortable with bonds and deposits.
As you get nearer retirement, you should consider taking the risk element out of your portfolio. This will avoid any unpleasant market downturns just before you decide to retire. If you intend to leave your funds invested and take an income you may want to consider moving into income producing investments.
How you access your pension is an important decision which requires careful planning. An independent financial adviser will take all your assets into consideration. They will give you expert, unbiased pension advice taking into account your individual needs and circumstances.