Planning For Retirement
After decades of working and saving, you can finally see retirement on the horizon. However, there are a number of things that you must know or do before retirement.
If you are planning to retire in a few years, you should consider taking these steps today to help ensure that you have what you need to enjoy a comfortable retirement lifestyle:
This is essentially the start of your retirement financial plan.
A good retirement financial plan will allow you to establish your current financial position but also look to forecast your preferred position at the time of your retirement and thereafter. It will give you a detailed picture of your assets, investments, debts, income, and expenditure while also looking at possible inflation, interest rates and investment or income growth.
From a financial point of view it is essential to understand what level of income you will require (after tax in today’s terms) as well as your fixed and discretionary expenditure and what income and capital you will use to meet these expenses.
Envisage the kind of retirement you want:
Retirement is more than just leaving your job and ceasing employment. Retirement could mean something very different to you than it does to some of your friends or colleagues. In order to plan for retirement, it is important to establish what retirement means to you, what you might want to do in retirement and when you want to retire.
Knowing what you want your retirement to look like and what your financial position will look like at that time will allow you to take any required action now to ensure you achieve your goals and have the necessary resources to have the retirement that you want.
Develop a realistic picture of the financial resources you will need in retirement
Your income will include your estimated state pension, establishing what you’ll receive from other pension sources and what savings and investments you have access to.
One of the key issues with retirement and planning for it is that income isn’t necessarily guaranteed, unless it is provided from a State Pension, Defined Benefit Scheme or Pension annuity. For many it will be necessary to fund their retirement plans by using a combination of pensions, savings and investments.
Estimate your expenses in Retirement
You can establish your expenditure by adding together fixed outgoings like household expenses (food, mortgages heating, electricity) with your discretionary outgoings (including holidays, clothing, golf memberships, eating out, family occasions and gifts).
Downsizing your debt
The best time to pay off debt is while you’re still working. If you plan to retire within the next 12 months—or even if retirement is a more remote possibility—prioritize eliminating those credit card balances, personal loans and car loans, and even mortgages.
Some of your pensions will have a retirement lump sum (part of which can be tax free) which can be used to clear debts.
You may also be considering downsizing your home which will decrease your overall debt or increase your investible assets.
Maximise your Pension Contributions
There are some significate benefits to maximising you pension contributions including tax free contributions, tax free investment growth, increasing income in retirement and potentially a higher lump sum (some of which will be tax free).
Make sure your pension and investments fit your investment goals and attitude to risk
As some or all of your assets will continue to be invested after your retirement, it is important that your financial plan takes your attitude to investment into account so that your long-term investment strategy can be established.
Your funds continue to have the opportunity to grow however this also keeps alive the prospect that the value may fall. Once the product charges, costs of advice and fund management fees are factored in, along with assumptions for inflation, this then provides a far more accurate outlook for your future financial plans.
This isn’t a guarantee of course and the information used will be based on assumptions and past performance, but what it will do is allow you to more clearly visualise your future income stream.
A good financial plan is not a process to be carried out once and then forgotten about. Your financial plan should be a core part of your half-yearly/yearly financial review. Your circumstances may change each year so this will need to be updated. Even small changes can make a big difference in the long run. There is also the area of Estate planning (link to Gerry’s Estate Planning blog) which needs some thought.
The aim of our Financial Planning process is to help our clients plan and achieve their financial and lifestyle objectives, within their desired timescale whilst taking the appropriate amount of risk, according to their specific risk profile. With this in mind, we aspire to help you to create and enjoy a lifetime of financial freedom and security by managing your investments and any risks, efficiently and effectively.
Financial Planning is a dynamic process, and we will review your Financial Plan on a regular basis, to track progress, keep you on target and to identify the effects of changed circumstances or legislation. In accordance with your financial requirements and your risk profile, each recommendation will provide summary information, general reasoning, initial advice and the specific ‘reason why’ it is suitable for you.
Get some help starting your financial plan
At Imperius Wealth we appreciate that your financial circumstances are unique and that solutions appropriate to your personal situation are required. We are committed to helping you meet those requirements. Please contact us today to discuss at email@example.com and one of our highly qualified professionals will get back to you.