7 important steps to take when you're planning your retirement

August 2022
Retired - Gardening
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As you get closer to the age when you’re thinking of stopping work, it’s important that you have plans in place for your retirement. 

After all, given it’s something you’ve probably looked forward to and it could easily last in excess of 20 years, this is well worth planning for. 

More importantly, by not planning ahead you run the risk of making mistakes, some of which could prove both irreversible and costly. Such mistakes could then have a serious detrimental effect on your quality of life in retirement.
So, here are seven key steps you should take to give you the best possible chance of living a fulfilling and rewarding life once you stop working.
1. Put a plan in place

You’d be surprised at how many people believe they can simply stop work one day and start enjoying retirement the next without any preparation.
As the old adage has it: if you fail to plan, you plan to fail.
A good way to start your plan is by considering these four questions and using your answers as a guide to how to manage your retirement:

  • What do you want to do in your retirement?
  • When do you want your retirement to start?
  • What family commitments do you have?
  • How big is your retirement fund?

There’s nothing wrong with indulging in some blue-sky thinking at this stage. The crucial thing is to start capturing it on paper.
2. Map out your expenditure

With an outline plan of what you want to do, the next step is to start working out how much money you’re going to need to finance it. 

As well as the big-ticket items and one-off events, you also need to establish what your day-to-day expenditure is going to look like.
Reviewing your recent bank statements is a good place to start. This will give you an idea of both your regular outgoings and discretionary spending each month. Don’t forget to knock off the cost of getting to and from work!

Then make sure you have an idea of your luxury spending. List how much you spend on non-essential items, such as holidays and eating out, each month. 

Remember to factor in the spending you expect to do in the early years of your retirement. This will help ensure you have the funds to cover any extra extravagances that you may want to splash out on to celebrate reaching this milestone.

3. Ensure you won’t outlive your money

Knowing exactly how long you’re going to live is impossible, but it’s an important consideration when you’re making retirement plans. This is because it can help ensure you don’t outlive your retirement fund. 

This could be affected by four key factors:

  • The state of your health
  • The kind of lifestyle you live  
  • How you spend your money
  • How your fund is invested.

We suggest getting expert financial and investment advice to help you get a better idea of how to manage and invest your funds. 

We offer comprehensive financial planning solutions, which include modelling and forecasting to help you plan your financial future. We also take great pride in our ongoing governance and review services that we provide throughout your retirement. 

4. Decide when and how you want to retire

An important part of your planning is to ensure you’re actually ready to retire. 

It’s possible that you’re looking to stop working at the first opportunity. After the pressures of the last couple of years, with lockdowns and restrictions on travel, it would be understandable if you wanted to step away from the world of work and start enjoying your hard-earned retirement. 

However, there are two key reasons that may not be possible:

  • You might not have enough money saved to be able to afford to stop working
  • Stopping working entirely may not be the right thing to do.

The days of leaving work for the last time on a Friday and then starting your retirement on the Monday are, for the most part, a thing of the past. 
Pension Freedoms legislation means you have great flexibility in how, and when, you can draw from your pension fund. This makes phasing your retirement a very attainable possibility. 

This means you could reduce your working hours and start to enjoy the benefits – and even start ticking some items off your bucket list. At the same time, you can carry on enjoying an income, along with the social benefits of working, without putting too much strain on your retirement fund. 

5. Know where the money will come from

It’s likely that your accrued pension fund – or funds – will provide you with your main source of retirement income. So, get up-to-date values, along with projections of the estimated value at your planned retirement age.  

Also, don’t forget your State Pension. It is unlikely to be enough to live comfortably on but should provide you with a handy regular income – and it’s guaranteed for life. You can use the government website to check when you’re eligible to receive it, and how much you might get.

As well as your pension fund, you may well have other assets that could provide you with an income. These could include: 

  • Savings, such as ISAs 
  • Investments, including stocks and shares
  • Your property

Bear in mind that there are various financial and tax planning issues arising from using any of these to provide you with an income stream in retirement. Again, this is where we can help so, please get in touch.

6. Consider where you want to live

Where you live could be integral to your retirement planning. 

You may well be happy where you are. You may have seen your most recent move as your final one, and you’ve laid down strong roots as the size of the property, it’s geographic location and the local amenities really work for you. 

But what if that isn’t the case? 

Various issues could affect your property situation. These may include:

  • Your children leaving home
  • Your property becomes too big to manage 
  • You want to be closer to your family and important amenities.

Downsizing may already feature in your plans. But don’t overestimate how much this could add to your retirement fund. 

Moving costs and Stamp Duty can eat into the equity you think you’ll get when you sell your existing property and purchase a new one.
7. Plan with your partner

It’s likely that you and your spouse or partner have lived a joint lifestyle up to now, so there’s no reason to expect this to change when you stop work.

However, it’s equally probable that you may have different expectations in terms of what you want to do after you’ve stopped working.
The important thing is to be aware of this possible conflict so you can ensure that both of your plans and aspirations can be considered.

Planning as a couple also adds the opportunity to maximise certain tax reliefs and help mitigate the effect of tax as you take your income.

Get in touch
Financial security in retirement is one of the most pressing concerns for many of us. However, by working with LEBC you can ease this worry and focus on your future.

To find out more about how we can help you with your retirement planning, please get in touch. Email clientenquiries@lebc-group.com or call us on 0800 055 6585.

Please note
The information contained in this article is based on the opinion of LEBC Group Ltd and does not constitute financial advice or a recommendation to any investment or retirement strategy. You should seek independent financial advice before embarking on any course of action. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.
When investing your capital is at risk. 
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits.
Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.

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