Your fifties are the perfect time to ensure your pension savings and retirement plans are aligned. This decade will hopefully see increased earnings, potentially the mortgage cleared or at a minimal level and the kids less dependent. Therefore, if your pension pot isn’t quite at the level you’d like it to be, this is the time to make the difference to ensure your retirement plan is working for your longer term goals. Here are 5 steps to consider to get your retirement plan on track.
1: Think about your retirement plan
What age do you want to retire? Will you gradually reduce your working hours in the lead up to retirement? Do you qualify for a full state pension?
Do you plan to stay where you are in retirement or could a future move be on the cards? This may mean downsizing your property and releasing some capital for retirement or perhaps even moving abroad. What about travel plans, new hobbies, or plans with the family? Having a good idea of what you would like retirement to look like, and when you would like it to start will assist with understanding whether you are on track.
2: Understand your options early
Pensions and retirement planning can be complex, so understanding your options and what will work best for your situation is important. Is a guaranteed income a priority or is flexibility key; or it may be a combination? Annuities are no longer the go-to pension product for the majority of retirees, therefore understanding drawdown and the many options that are available ahead of reaching retirement age will make the transition that much smoother.
3: Consider cashflow planning
Now that you have a better idea of the where’s and the when’s of retirement and perhaps have a better idea of what core and discretionary spends may be required at different stages of retirement; a cashflow plan will help to make this a reality. Your financial planner can work though different retirement scenarios with you to help highlight any potential shortfall, give comfort that the plan is on track or reassurance that retiring early is affordable.
4: Make sure your pensions are in the right place and in the right investment
The average person has 11 jobs throughout their lifetime; each of these could have meant a different pension. Do you know where your pension pots are and are they doing what they should be doing for you and your retirement goals? Tracking down any old pensions, fully reviewing them with your financial planner and consolidating where appropriate should be a priority. After reviewing the plans to ensure they are in the most appropriate pension(s), the next step is to make sure you are invested according to your risk appetite and in well-managed investments – don’t leave your old dormant schemes invested in poor performing funds!
5: Review your contributions
Now that you have the right plans in place and have a good idea of retirement income targets, you can take the next steps to meet your goals. For some individuals, maximising pension contributions should be the first step, utilising your annual allowance to benefit fully from tax relief is key. Also, check if you are able to carry forward any unused annual allowance from the previous 3 years. Once you have maximised any pension contributions other savings earmarked for retirement should be considered. Remember it is not just pension plans that can fund retirement, in fact they may often be the final pot you draw upon in retirement given the inheritance tax friendly nature of pension schemes.
The right course of action for you will depend on your individual circumstances and objectives. Your financial planner can take you through each of these steps to ensure your retirement plans are on target and provide you the comfort of knowing your future plans are achievable. We work with our clients up to and throughout retirement to simplify the complicated, take the stress out of retirement planning and ensure you have the right investment strategy in place.