Retirement is one of the biggest decisions any of us will make. It’s right up there with getting married, buying a house and having children. After health, money is the thing most people worry about and retirees are no different. No one wants to run out of money in the prime of their lives. In this blog, we are going to give you our key retirement advice tips. These tips are based on years of experience making sure hundreds of clients never run out of money and have a happy, worry-free retirement.
So, You Want Some Retirement Advice?
Retirement Advice Tip #1 – Choose the timing wisely.
This piece of retirement advice comes from a long-standing client. He was a professional trumpet player, had played in several bands and even auditioned for the Trumpet piece in You Can Call Me Al, by Al Simon. We had been discussing his retirement for nearly a decade. The decision was only partly about money, the other consideration was his change of purpose. He was going from Joe Bloggs Trumpet player with the Royal Philharmonic to plain old Joe Bloggs, (they were his words not mine). Eventually, the travelling got too much and he put his Trumpet away for good. This was in March, and in June I received an email from him. The gist was he was loving his retirement. He’d bought a bicycle and had started cycling most days around the local lake. Generally, he was the happiest he’d been for years, but he had some retirement advice for my other clients. “They should retire in the Spring”. The change of season from Winter to Spring, the new beginnings, and the lighter evenings, all made his transition easier.
Retirement Advice Tip #2 – Pay For Some Advice!
That’s the airy-fairy bit done, let’s get onto some practical retirement advice. This won’t come as a surprise to anyone, but my next piece of retirement advice is to get some retirement advice!. That’s right, you should find a reputable, independent, financial planner who will charge you a fixed fee. Up until now you’ve probably had a group personal pension, you’ve steadily made contributions and have built up a nice pot. The chances are it’s invested in the default fund. That might have passed muster while you were working, but not in retirement. You need someone to help you build a sustainable income strategy and that’s not easy. Once you’ve run out of money it will be too late. If you don’t want to pay for retirement advice there is a free resource you can use called Money Helper which is excellent.
Retirement Advice Tip #3 – Understand Your Options
Make sure you understand all your options. Many years ago, the FSA as it was then introduced something called pensions simplification, never has there been a bigger oxymoron. Pensions, and especially retirement income options are a minefield. Navigating that minefield can be costly. Few people understand the complexity of retirement advice. To begin with you must decide whether you want a fixed income for life, an income you can vary to suit your needs or a combination of both. Each has benefits and drawbacks. If you want a flexible income, you’ll need a suitable pension contract. Since pensions freedom, drawdown has become more popular for its flexibility. There are plans which will allow you to take your pension commencement lump sum in as monthly payments rather than a lump sum. That can be a really useful way to provide tax-free income in retirement and isn’t common knowledge.
Retirement Advice Tip #4 – Check Your State Pension
Regardless of what you might think or hear, the state pension is a valuable benefit. To give you some context the current single-tiered pension is £187 a week assuming you’ve made sufficient national insurance contributions. If you went to the open market to replicate that income which increases with inflation, you’d need a pot of around £235,000. With the best retirement advice on the planet, you won’t replace that. To get the maximum benefit you need 35 years of qualifying national insurance contributions. A significant number of people don’t, because they have taken time off to raise a family or opted out of SERPs. If you don’t have 35 years it might be worth you paying voluntary contributions. You can top up to 6 years and you’ll find more information here. You can check the number of qualifying years you have here State Pension Forecast
Retirement Advice Tip #5 – Test Your Spending
Unless you’re extremely fortunate your income is likely to fall in retirement. That shouldn’t be a problem for most people, you no longer need to save, if all goes to plan, you’ll be mortgage/debt free, and the kids won’t be relying on the bank of mum and date. But be wary, you’ll also have more time on your hands to go for that morning coffee and cake or that dream holiday to a faraway place. If you start to budget before you actually retire, you’ll learn to manage on your retirement income so a) won’t come as a shock and b) if you are struggling you still have time to adjust your plan.
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A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future