The shift from work to a life of leisure in retirement is one of the biggest transitions you will make in life.
After decades of working and saving for your long-term future, you will have the time and freedom to do all the things you have been looking forward to.
The success of your retirement will depend, to a certain extent, on how well you have planned for it. Your financial plan will affect whether you can afford a comfortable lifestyle, and do everything you want to do in your later years.
But the need for a sound financial strategy does not disappear when you stop working. Read about some of the key issues you need to consider and plan for after retiring.
You will continue to face financial challenges after you have retired
Perhaps the most impactful issue you will face in retirement is that you will no longer be earning a regular salary. You will need to consider this when making financial decisions.
Furthermore, life expectancy data published by the Office for National Statistics (ONS) suggests that if you are 60, you are likely to live for a further 20 years or more.
This means you will need to ensure that you do not outlive your income.
It can be helpful to segment your retirement into three phases, each with their own challenges:
- The years immediately after you retire when you are likely to be most active.
- A subsequent period when you settle into a quieter routine.
- The final phase of your life when health issues may become predominant, and you might need to consider care arrangements.
It may be beneficial to plan for these phases separately as you go through your retirement, both in terms of your financial arrangements and other issues such as your health and legacy.
Your planning should reflect the fact that your income needs are likely to change
As you move from a long period of building your pension fund, to drawing from your savings, managing your income carefully will be integral to your retirement.
It is likely that you will draw your income primarily from your accrued retirement assets, along with other sources such as investments, and perhaps the sale of property or a business.
You will need to find a balance between funding a comfortable lifestyle while not overly depleting your fund.
All this underlines the importance of budgeting and having a clear idea of your outgoings. These will include regular expenses such as household bills, food, and transport, as well as more substantial outlays such as holidays and home maintenance.
It is also imperative to consider the effect that inflation can have on the purchasing power of your pension fund. Rising prices mean that, to maintain your standard of living, you will likely need to increase your income each year, even if your spending commitments are unchanged.
You will want to enjoy your retirement without constant money worries, so it is important to review your income plans regularly. This ensures your money continues working effectively for you throughout your retirement years.
Your investment strategy will continue to be very important
Your investments are the engine that drives your financial plan, and this will continue to be the case after you have retired.
It is important to create an investment strategy that means you can still enjoy strong growth in the value of your funds.
At the same time though, you will likely want an element of security to ensure that you are still able to draw the income you require, even when markets fall or experience a period of anaemic growth.
Key criteria that will determine your investment choices, such as your attitude to risk and your capacity for loss, will be just as important after you have retired as they were while you were still working and making contributions to your fund.
Healthcare issues may become increasingly impactful
During your working life you may have taken your health for granted.
You may also have benefited from an employer-sponsored private healthcare scheme, which meant that the cost of any major illness was not necessarily a significant financial issue.
However, once you have retired, and are at an age where fitness and mobility start to become problems, your health considerations are likely to be more important, and you may need to plan for various scenarios.
While the NHS provides free healthcare, there is the ever-present spectre of long waiting lists for many treatments. Because of this, you may want to consider funding your own treatment through a private arrangement.
Furthermore, you may also need to plan for any care requirements you could have later in your retirement years. While these may not necessarily involve the high cost of residential care, you might require adaptations to your property. Alternatively, you may need to downsize to somewhere more suitable for your needs.
You should regularly review your legacy planning arrangements
As well as ongoing planning around your retirement income strategy, you will want to review your legacy plans regularly and ensure they are still relevant.
For example, you may want to check that your will is up to date and accords with your wishes, so that your wealth will pass to the people you want it to, in a timely manner.
Because of your increasing age, you might also want to think about setting up power of attorney arrangements. This allows someone you trust to make decisions about your finances and your health if you are unable to do so.
In addition, Inheritance Tax (IHT) planning can help mitigate the amount of tax your beneficiaries are liable for when you pass on.
Get in touch
If you have any queries about your own retirement planning arrangements and feel that you would benefit from professional guidance, please get in touch.
You can email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning or wills.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.