10-point guide to financially happy retirement – and why Scots firm says you need to start planning today
What is the plan for your Happy Ever After? Ahead of Acumen’s Ready Set Retire event on 21st November, Andrew Sutherland, financial planner at Acumen Financial Planning, sets out a 10-point plan to help your finances stay on track for living the live you want after retirement.
1. Picture your retirement
"Life after work" is how we think of retirement today – a point in life when you have the time to make the most of travel, recreation and time with family and friends. Start with your destination in mind. Do you want to travel overseas? If so, how often? How regularly do you want to buy a new car? Will you stay in the family home or downsize? Are there expensive hobbies or memberships that you will want to keep up or take up? Identify some ideal scenarios and goals.
2. Set the date
Circumstances can change, but to know what you will need to save to meet your retirement goals you will need to have an idea of when you want to stop work. Consider how healthy you are likely to be in retirement too, depending on your genetics, health habits and diet. If you are in good health, you might want to work a little longer and vice versa.
3. Start early
Amassing a healthy savings pot is a bit like starting a business - it can take a lot of sacrifice and effort to get it off the ground, but it gets easier over time. Budgeting wisely to make small contributions in your early days of working can make a significant difference in the long run.
The wonders of compounding - reinvesting proceeds and earning returns on returns - could leave you with a sizable pension pot.
4. Consider your investments
What you invest in depends largely on your attitude to risk and your investment timeframe. If you have a long time until retirement a mix of investments should suit your requirements. As retirement nears, moving into a lower risk investment portfolio is sometimes recommended. Many pension providers automatically offer "lifestyle" funds. It is recommended to do your own research or seek advice to fully understand what you are invested in and make sure it is tailored to your needs and circumstances.
5. Save tax
It is possible to put up to £60,000 per annum of your earnings each tax year into a pension with tax relief at your highest marginal rate. You can also carry forward any unused allowances at £60,000 a year for the previous three tax years. This is a great chance to boost your pension pot and to benefit from any available tax relief. It is limited by contributions you have already made in previous tax years and your total taxable income in the year in which the contributions are made.
6. Stay on Track
According to the latest DWP figures, as many as 38% of the working population in the UK are not saving enough to sustain their living standards in retirement, * with many unclear as to exactly how much they will have to live on in retirement. A qualified financial planner will be able to advise you on this. A financial planner will also act as your long-term financial partner ensuring that irrespective of any changes to legislation you will still be able to achieve the retirement you want and have worked so hard for. The recent budget having made sweeping changes to Inheritance tax, Capital Gains Tax, Stamp Duty, and the way your residual pension will be treated when passing to your loved ones highlights the importance of having a financial professional on your side. MoneyHelper website is useful website with guides and tools that can get you started in managing your money, pensions and selecting a financial advisor, details can be found at https://www.moneyhelper.org.uk
7. Keep your balance
Over time, your pension investments can move out of line with your goals and risk profile, and you might find you are taking more, or less, risk than is appropriate.
Your financial planner can advise on the most appropriate portfolio design for your investments, to support your needs and circumstances as they change through different stages in your financial journey. The ongoing management of this could include matching the right type of assets to planned withdrawals, in line with your asset allocation will make sure that you are invested where you should be.
8. Plan for the unexpected
You could lose your job, fall ill, have an accident, or be saddled with more pressing financial objectives. It is wise to put in place some protection to safeguard your retirement goals.
9. The big picture
What resources will you have to draw on in retirement, other than private pension savings? Will you release equity from your home? Part of the role of a financial planner is to gather all such details, data, and where necessary fill in the gaps to provide you with clear answers and plan on how your retirement will be financed.
10. Know your options
You can currently access your pension pot from age 55, taking 25 per cent as tax-free cash. With the normal minimum pension age increasing to age 57 in 2028. The key benefits of leaving your pension invested and drawing amounts as and when from it include control over your pension assets, flexibility, and the option to pass on your residual fund to beneficiaries. Advice is always recommended before making any decisions on your pension.
Andrew Sutherland is a Financial Planner at Acumen Financial Planning. Find out more at www.acumenfp.comor hear from the team at their next Retirement Planning event in Edinburgh on 21 November. Click here for tickets.
The information in this article is based on Acumen’s understanding of current legislation at the time of publication which is subject to change and should not be taken as advice.