Ludlow Lifestyle Sep - Oct 2021

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RETIREMENT PLANNING: A GUIDE Katie Thomson shares tips for 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. 44 | www.minervamagazines.co.uk
www.minervamagazines.co.uk | 45
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Ludlow Lifestyle Sep - Oct 2021

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