Retirement is a hugely painful and emotional stage in life. Most of us spend the bulk of our existence earning money, and then suddenly we to need to turn off that steady and reliable income stream and live on what we have accumulated. This is an incredibly scary concept. Will you run out of money? Will you be able to even afford to retire? Will you be too worried to enjoy your retirement and end up dying the richest person in the graveyard?
With many of us spending in excess of 25 years in retirement, it should be a time of happiness, new adventures and enjoying the fruits of our labour. But what options do you have?
Future planning is the greatest weapon in your retirement arsenal. Imagine going bowling blind-folded. Yes, you might hit a few pins, but wouldn’t your odds be increased if you could see where you were aiming? Retirement is just like this: If you don’t look ahead now and start to think about the type and amount of income you may need, how will you know if you are going to have enough?
Back in 2014, the then Chancellor announced a huge shake-up to the world of pensions. This meant that pensioners could finally do whatever they wanted with their hard-earned savings, whether that be taking a steady income or drawing the lot as a lump sum.
Flexibility over how and when you draw your pension has many advantages, especially when it comes to protecting your wealth more effectively against tax, estate and legacy planning, and seeking out more suitable investment opportunities. This change in legislation is a huge opportunity for retirees, but with flexibility comes complexity, and the opportunity to make some big mistakes.
As well as taking care of the tax and investment advice needed around retirement, at Efficient Portfolio we use something called ‘Lifetime Cash-Flow Forecasting’, which hypothesises various scenarios, such as drawing 25% of your pension (which is currently tax-free), buying a new house, market crashes and lowered income, and illustrates what these events could do to your wealth. It is by no means a crystal ball, but it does help to identify what planning opportunities could work for you, and what areas you need to improve upon now, so that you could have a more secure future.
We also use this technology to plan ahead for some of the more enjoyable elements of retirement, such as dream holidays and gifts to your loved ones. Filling your retirement with the things you love and having the confidence in knowing that you can afford to them, is psychologically crucial.
Whilst it is not my place to tell you how to spend your hard-earned cash in retirement, I would advocate some careful and strategic planning to maximise your pension pot, minimise your tax, and ensure you don’t run out of money during your lifetime. Retirement is about enjoying the proceeds of your success, and I am all for people ‘front loading’ their retirement by ticking off the bucket list, but much better to do so with clarity on the future and otherwise you are rolling the retirement dice!
If you would like to know more about what options you will have in retirement, why not pop in and see us? We will be open during Oakham’s Christmas Late Night Shopping event on Monday 10th December and will be serving our guests delicious mince pies and mulled wine. Our advisers will be at hand too, to answer any questions you may have about your current or future planning. We look forward to seeing you there.
The first step in achieving your goals is to discuss your current concerns with one of our qualified Financial Planners.
Why not complete our 4 minute retirement plan and get a personalised plan in your inbox now!