Being financially prepared for retirement is essential. If you’re not, the later life dreams you’ve been working towards for your entire life might end up being just fantasies. Consider getting financial advice because how you choose to manage your savings and pensions will have a large bearing on your future happiness and stability.
As you approach retirement, there are some steps you need to take to make sure you’re ready to transition from work to retirement. Our checklist should give you some idea of what you need to do:
1. Get a State Pension statement
If you’ve paid National Insurance you should be entitled to some of your state pension. How much you receive will depend on your contributions so far. Find out how much you are due using this government tool.
2. Have a look at your defined benefit (final salary) pension
If you have a defined benefit scheme, you should be sent a yearly statement showing how much pension you’ve built up so far and how much you might get when you retire. If you can’t find these, it’s worth getting in touch with your pension provider to get a new statement. Knowing your retirement income is essential.
3. Add up your savings and investments.
If you have savings and investments, go through your various accounts and funds to see which of them you could use for your retirement. Total up their current value.
Seeing a financial adviser could give you some indication of what your current portfolio would mean for funding your retirement. They’ll be able to help you manage your different accounts with your future goals in mind.
4. Trace any lost pensions
If you’re unsure where a pension from an old employer may be, it’s essential that you track it down. The government has a free tool to help you. Access it here.
5. Think about where your pensions are invested
If you have a defined contribution pension scheme, some or all of your money will be invested in funds. Thinking about the amount of risk involved is essential.
Your future plans and the nature of the funds they are invested in will show you if it makes sense to ‘de-risk’ your pensions savings. It’s best to get financial advice to find the best option for you.
6. Consider whether you need to boost your retirement income
If you’re not sure whether you’ll have enough money to sustain the life you want in retirement, it might be wise to consider boosting your retirement income.
There are two ways you can do this:
- Increase your contributions
- Defer your retirement date
With your retirement income, it’s best to play safe and err on the side of caution. Retiring with more than you need will mean that you will leave your loved ones with more when you die. Too little, however, and your later years may be much harder than they would otherwise be.
7. Draw up a retirement budget
Sit down and get a rough estimate of your retirement spending. Take into account any plans you have for the future, such as buying a second home.
Remember that your travel and leisure costs will likely increase as you have more time and freedom to do the things you want.
8. Try to clear your existing debts
It’s best to start your retirement as debt free as possible. This is because your income is likely to fall so any fixed repayments will take up a larger share of it.
If you still have a mortgage, you might want to think about paying it off before you retire. If you have a range of debts, try to pay them off in the order of their rate of interest, with high interest debts coming first.
9. Decide on a date to start taking your pension
You need to set a target date to start drawing an income from your pension. You don’t need to stop working to begin drawing from your pension pot, but you generally need to be aged at least 55.
If you retire earlier, you’ll need to take into account how doing so will reduce your retirement income. Before setting a date, it’s essential to make sure that you’ll have what you need to live well during your retirement. Remember, you might live long into your eighties or nineties.
Depending on the type of pension you have, you might be able to transfer it. However, it’s important to seek professional financial advice before doing this.
At Bailey Richards we’re experts in delivering retirement advice. If you have anything you’d like to discuss with regard to your future, do not hesitate to get in touch. We would be more than happy to help.