Seven things you’ll want to do before you retire
Pension Freedom legislation changed what you can do with your pension when you retire. With the options now wide open our pension expert, Daniel James, reveals his 7 tips to getting the most out of your pension.
1. Decide what matters to you
Whether you want to travel the world, take early retirement or spend some time with your family, your priorities will dictate how much money you need and what you choose to do with it. Keep in mind that it’s ok to change your mind. Your priorities when you’re 50 might be different when you’re 70 or 80. You just have to remember #6 on this list.
2. Understand your situation in reality and risks
We might all have a bit of an idea about the lifestyle we want at retirement but you also need to remember the reality. For example; you want to retire at 60, in an ideal world you’ll have paid off your mortgage, have financially independent offspring and hopefully not have to worry about the cost of long term care for at least 10 years. In reality, however, things are rarely that simple. Ask yourself the following questions;
- Can you retire when you want?
- What might stop you?
- Can you “live the dream”?
- Do you have a backup plan?
3. Review what income you need
Working out what lifestyle you want in retirement will give you an indication of how much income you’ll need to sustain it.
Income can come from a number of sources such as pensions, investments, property and inheritance. How and when you use these sources is likely to be dictated by my next point; tax implications.
4. Get to grips with tax implications
Pensions and investments carry different tax implications now and at retirement. This means that it might be appropriate – depending on your circumstances – to use these at different times.
Finding the most effective way to understand and manage tax considerations is something that is best done with an Independent Financial Adviser as it will vary from person to person.
5. Take remedial action
Reviewing your current pension funding and fund values now can help you in the future. There is also remedial action you can take with your investments (like assessing where you’re investing and at what risk). This can all help make the most of the opportunities, and minimise the tax implications, for these income sources in the future.
6. Review and continue to monitor your plan
These steps are effectively a financial plan and reviewing your plan regularly is essential to making sure you can retire when you want to retire and live the life you want to lead. Annual reviews are common unless you have a significant change in circumstances
7. Get quality Financial, Accountancy and Legal Advice
As an Independent Financial Adviser, I would always advocate seeking professional advice. These steps are just the very beginning of pension and retirement planning, there is a lot more I haven’t covered.
Planning for your future is exciting and full of possibilities especially with pension freedom.
This article is for information purposes only and is not personal advice. It is based on our current understanding of legislation and HMRC guidance which could be subject to amendment. It is correct as at January 2019. You should always seek financial advice. The value of your investment can fall as well as rise and is not guaranteed. You may not get back the full amount invested.
