How to Plan for Retirement

Planning for your retirement has never been more important – here’s what you need to know.

Why do you need to plan for retirement?

Retirement planning has come a long way over the last couple of decades. It seems to be that fewer people enjoy the guaranteed income that comes with a final pension salary, and of course as life expectancy increases so does the age you need to be to access your State Pension.

The responsibility of having plenty money in retirement is entirely on your own shoulders – so the more prepared you are, the better your retirement will be.

We know speaking or reading about retirement can be a boring subject for some. But all in all, the end goal is to make you richer in retirement, which should be a major motivator to get started with retirement planning.

How do I plan for retirement at different ages?

Contributing substantially to your pension pot, as early as possible is definitely the preferred option as you will utilising the powers of compound interest.

Obviously this is easier said than done, if you’re in your 20s or 30s then you may be focusing on other financial commitments like paying off your student loan, getting on the property ladder, starting your very own family.

This part of the guide will highlight some things you should be thinking about at certain ages, even if the main build-up of your pension savings comes later.

Retirement Planning in your 20s
What you need to know:

You’ll be automatically enrolled into a pension by your company
You’re required to pay in at least 5%
You can opt out – but it’s not wise to do so. After all, you’re getting free money from your employer

What you need to do:

Join your company pension scheme
Sort out your debts – including clear your student overdraft
If you’re self-employed, set up personal pension or a Lifetime Isa

Retirement Planning in your 30s
What you need to know:

Having a baby won’t affect your National Insurance contributions
Starting to build up your pension pot requires your attention
If you’ve switched jobs, your old pensions stay with your old employer

What you need to do:

Put away as much as possible – you can add more than your employer requires you too
Keep pension going despite other priorities (eg wedding, home, children)
Put your pension savings in high-growth investments

Retirement Planning in your 40s
What you need to know:

Some people in this age group may have a final salary pension, which pays a guaranteed income at retirement.
This could form a foundation of your pension income, so work out how much you need to have a comfortable retirement.
You have around 20 years until you reach retirement age.

What you need to do:

Check your state pension forecast to see if you’re on track for state benefits
Assess the size of your pension pot and find out how the money is invested
Make sure you update old pension schemes with new contact details
Think about increasing contributions (make the most of pay rises and bonuses)
Consider opening a SIPP

Retirement Planning in your 50s
What you need to know:

The state pension age is increasing
You can access personal pensions from the age of 55 – but this has consequences
Company schemes will start investing your pension is less risky investments, so growth may be lower
You can use some of your pension savings to pay for professional pensions advice

What you need to do:

Think when you might want to retire
Get a state pension forecast
Increase contributions if your earnings will allow
Consider the need to support grown-up children

Retirement Planning in your 60s
What you need to know:

The state pension age is currently 66
You don’t have buy an annuity with your savings if you don’t want to
You pay tax on pension income

What you need to do:

Make sure all your debts are paid off
Consider when you want to stop working
Top up your state pension
Consider all pension options

Retirement planning checklist

As you are getting ready to retire (a few years before you retire) there are some key things to consider. Our checklist will ensure you have a smooth transition into retirement.

Get an idea how much your retirement income is likely to be

Throughout your working life your pension pot should be building up, but do you know how much you are on track with for retirement?

You can look at your pension statement as an indication of the annual retirement income that is likely to be generated from your final salary scheme or the current size of your fund inside your defined contribution plan.

Check your state pension

As you may know the State Pension age is rising and this means people are getting this regular government-provided income at a later age than previous years, once you do receive your state pension this can provide a major boost to your finances.

A couple claiming the full basic state pension will receive around £14,300 per year under the old system, or around £18,600 if they’re both eligible for the new state pension (assuming they receive the full level of new state pension – many will receive less).

A state pension forecast will help you to gauge how much you’re on course to get from the government.

Track your expenditure before you retire

How much you spend in retirement will vary as you move through the different post-employment stages. Having an idea of expenditure levels will certainly help you to plan for the longer-term.

As you move through the different post-employment stages your expenditures will vary. Having a round about idea of what your expenditures will be will definitely help.

You will likely have less money to live on that you used to when you were working, but you also may have less bills to pay, e.g. you may have paid off your mortgage and travel costs to work will no longer be necessary.

When should you start drawing your pension?

There are now more ways you can access your retirement savings and when you can start withdrawing your money.

You don’t have to be fully retired to start taking your pension as you can take it when you reach the age of 55, even if you are still working. However, the earlier you start taking your pension the quicker the pot will start to deplete.

Get professional help and advice

You’re not on your own when it comes to making financial decisions in relation to retirement.

If you do have complex decisions to make then it may be worth having a chat with one of our financial advisers.

Our advisers can give you an overview of your options for using your pension pot you can call us in the contact us section or submit your details and we will give you a call.