Your best shot at retirement

How much control do you have over your own retirement?

I speak to a lot of clients who have never given much thought before about when they will retire and what their life will be like at that stage. When asked about what age they plan to retire, often clients say things like ‘I think my pension age is 67 now, but who knows!’. People often have a vague idea of when their state pension age is and assume that that will be when they need to continue working until and have not given much thought to what they will do at that point or what their lives will be like.

I have met with clients of all ages and discussed their future and what they would like to achieve and it is important to give some thought in advance about when you would like to retire and, crucially, how much income will you need when you retire?

A good starting point is to sit down now and write down meticulously (and honestly!) how much you are actually spending each month on your current lifestyle. Then have a think about what sort of lifestyle you would like when you are older and have given up work. How will things be different? Will you want more holidays or to eat out more? Are there any expenses you have now which you won’t have when you retire? Start to work towards a number, per month or per year that you will need and understand what that number is and what it represents for you in your retirement.

The next part is about actually sitting down and thinking honestly about how you like to spend your time. Some clients will tell me that they really enjoy working as it gives them a sense of purpose and the thought of giving up can be quite daunting, whereas other clients tell me they’d give up tomorrow if they could. These days, people rarely work right up until the day when they receive their state pension and then stop work. Many people will gradually ‘phase’ into retirement, perhaps reducing working hours over a period of time before leading up to full retirement. Think about what you would do if you worked less and is this something you would like to achieve? When would you ideally like to be able to take your foot off the gas?

The next part is arguably harder. With some idea of what ‘shape’ of retirement you would like, as well as a target income amount to aim for, how do you know if you are on track to achieve it, or if it is just wishful thinking? Working with a Financial Planner can be helpful to map out your future, taking the details of any existing pension arrangements, or other investments you have, making some assumptions and then projecting forward to see if you have a shortfall or if indeed you are already on track to meet your objectives. If you are on track, then great, now is the time to think about what you need to do to stay on track or even improve your position. If you have a shortfall then you can start to think about the things that you can control:

• Are you prepared to move your retirement goalpost and work for longer?
• Are you prepared to reduce your income target for retirement?
• Are you prepared to save and invest more of your income now towards your future?
• Is there a compromise between all three of these?

Having this level of understanding about your own position puts you in control. You can choose to compromise if you like, is it more important to you to have the time away from work, or more important to have the money in retirement for those extra holidays and luxuries?

Sounds great, so what could go wrong?

Well hopefully nothing, but there are always things that could push you off course that should be considered, for example:

• What if I get sick, or my partner gets sick and we can’t save as much as we’d like?
• What if I have some unforeseen expense that I haven’t planned for?

These are things that you need to certainly think about and plan for. The best retirement plan in the world means nothing without the appropriate contingency plans in place, so working with an advisor can help you to cover these eventualities, keeping you on track for your future.

How else can an advisor help me?

Pensions in particular are complicated, especially as the rules can change frequently. There are some common questions I get asked all the time from new clients, for instance:

• How do I know if my pension is invested correctly?
• Is my pension growing as much as it should be?
• Are the charges on my pension competitive?
• How do I draw income from my pension?
• What about my Pension tax free lump sum? Should I draw it all in one go?
• How can I be more tax efficient?

Your advisor will work with you to answer these kinds of questions to give you confidence in your plan. Your advisor will also help to make sure that you take advantage of tax reliefs that are available, ensuring that you are not losing out by paying more tax than you need to, which can make a big difference over a number of years.

Working with an advisor on an ongoing basis can help put you in the driving seat, making retirement no longer something that just happens to you when you get to a certain age, but a new life stage which you are looking forward to.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

Please note that the FCA do not regulate will writing, tax planning and trusts.

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