The Complete Guide to Retirement Planning
Planning for your retirement is one of the most important things you’ll ever do, Follow our guide to help you plan as well as possible for your later life.
Decide when you want to retire
These days, you can plan when you want to retire. State pension is not available until your reach the set pension age, which is between 61 and 68, depending when you were born and if they’re male or female. Anyone can carry on working past State Pension age.
You can calculate your State Pension age HERE
If you carry on working beyond state pension age, the good news is that you no longer have to pay National Insurance. You can also delay drawing your state pension, which means you will get more when you do retire. Once you reach state pension age, you can receive your state pension even if you’re working. It will be counted as income and will be taxable in the same way as your earnings or any savings you have. It is paid gross. You can also receive a private pension if you carry on working, but you can’t pay into the same scheme you are receiving this pension from. Private pension is also taxable, normally paid net. If you retire earlier, it’s worth remembering that you will receive a smaller pension. If you have any gaps in your National Insurance payments, due to having a family or being out of work, you can sort this out by contacting the Department of Work and Pensions.
You can read more details about state pensions HERE
Read how state pensions are changing from April 2016 HERE
Calculate how much money you might need in retirement
It’s important to sit down and work out your current monthly expenditure from bank statements and credit card statements and think about how this might change when you are not working. Will you travel more? (You will be entitled to free bus travel and subsidised rail fares). Will the home cost more to run if you are spending more time there? Think about one off expenses, such as house repairs, moving and allow some contingency for the unexpected. Also think about future care should your health deteriorate in future years. This can be very expensive and its worth considering the options. The average British wage is about £26,000, so to replicate that in retirement you’d need a pension pot of more than £300,000. You can read more about how to plan for care HERE
Calculate your final pension
Six months to a year before you intend to retire, contact your current and past pension providers and find out what pension is owed to you and how it will be paid. At work, you can contact the pension trustee to get this information. Regarding your State Pension, the Pension Service should contact you four months before you retire, but you can call them on 0808 100 2658.
Decide if you want to consolidate all your pensions in one place, as this can be easier to manage. You need to decide if you want to buy an annuity, which will give you a guaranteed amount of money monthly, or if you want to keep investing your pension and taking income from it whilst benefitting from growth. You might also want to take a lump sum upfront, but you need to consider that this will leave less for the future. Whatever options you are considering,, you should get professional advice on this, however, particularly regarding exit penalties and buying annuities. The Society of Later Life Advisers is a useful place to start and you can contact them HERE
Tell HMRC when you are retiring
Try to give HMRC some notice, ideally a few months before, of when you intend to retire.
Check if you have claimed your benefits
You might be eligible for pension credits, which can top up your basic state pension and you might also be eligible for other benefits, such a Winter Fuel Allowance. You can read more about what benefits you might be entitled to HERE.
The most important tip is to plan as far ahead as you possibly can…. And enjoy yourself!