West Dorset Living Aug - Sep 2021

RETIREMENT
PLANNING:
A GUIDE
Getting your financial
ducks in a row for a happy
retirement...
Retirement planning is a multi-faceted
process which evolves over time - to
have a comfortable and secure future,
you have to have the means to fund
it. Fewer people have access to the
guaranteed income that comes with a
final salary pension, and with longer to
wait until eligibility for the state pension,
it’s pertinent to start planning as early as
possible for the retirement you want. The
better prepared you are now, the better
your retirement will be.
There are many strands to retirement
planning, and much of it depends on
your stage of life. It’s important to seek
advice from a registered financial planner
who can help you make the most of your
unique circumstances.
There are some handy way points to help
you get a grasp on where you are and
what you will need - here’s a checklist of
things to consider:
Understand what your retirement
income is likely to be:
You will be adding to your pension fund
during your working life, but it’s important
you get a handle on your various pension
pots to forecast the actual figure you will
have access to.
Check your state pension:
The rising state pension age can have a
real knock-on effect to your retirement
planning - a state pension forecast will
help you to gauge how much you’re on
course to get from the government.
Get an understanding of your
expenditure:
Having an idea of your expenditure will
help you plan longer-term. Your living
costs are likely to be a lot lower than
in other phases of life - you might be
mortgage-free and you don’t have the
same costs for commuting, recreation or
childcare for example.
You may wish to improve your home
or go on some amazing trips, so it’s
important you know you have the
financial reserves to do this.
When should you start drawing a
pension?
You don’t have to stop working to draw
down your pension - as long as you
are over the age of 55 - but be aware,
the sooner you start dipping into it, the
sooner the pot will deplete.
How much will retirement cost?
This is the golden question, and really
depends on the level of comfort or luxury
you are looking for in your autumn years.
A recent Which? study found that the
average retired household (those living
alone or as couples) spent an around
£2,170 per month - this is covering all
the basic areas of expenditure and some
luxuries like European holidays. Those
looking for a more luxurious lifestyle
including longer-haul trips and new cars
every five years would need to allow
for approximately £3,400 per month, or
£41,000 per year.
Once you have a framework for the
amount you’ll need, and what you are
on track for saving, you also need to
consider how you will access your
pension pots - these might be state
pension, a final salary pension and a
money purchase/defined contribution
pension.
With your defined contribution pot,
such as the one you might get in the
government employee scheme, you can
draw the entire pension pot in one go,
but this will mean it’s entirely down to
you to make the money last and you’ll
invariably pay a substantial tax bill. Most
people with these pensions will opt for
income drawdown or an annuity, or a
combination of both when it comes
taking money out of their pension.
With careful planning and accurate
forecasting, your retirement can be
something to really look forward to, but
it is essential to make an assessment of
your position as early as possible and
use the advice of experts to make your
money work harder for you.
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