If you are coming up to retirement, consider these five factors that will help to organise your finances to meet your retirement goals.
1. Take advice
As you approach retirement, it is crucial to take advice. Consumers almost always stick with their existing pension provider instead of shopping around.
A wealth manager will help you find the best value retirement income product to meet your needs. They can also help you understand how much you can safely withdraw – balancing your income needs against life expectancy and the need to invest for income. Managing income from your investments and pensions is very different to investing for growth.
At AAM Advisory the initial consultation is free, so you can decide whether our service is good for you.
2. Pensions are a good long-term investment
Some people are taking their pension savings out but not actually spending them. Instead, they are investing in things like cash or buy-to-let. They are giving up the advantages that pensions offer – such as future tax-free investment growth.
Cash is unlikely to produce good long-term returns, and illiquid assets like property present their own risks. A wealth manager can help you figure out the best way to find an investment portfolio that matches your current financial needs with your retirement goals.
3. Ask if you need to touch your pension
If you have a number of different pots to provide your retirement income, they will be taxed differently both during your lifetime and when you die. It is important to consider this when deciding where to draw your income in retirement.
For example, for those who are UK domiciled many pensions are not usually included in your estate on death, which means inheritance tax of up to 40% could be saved. Any unused funds could be passed on in a tax-efficient way. It is important to consider whether it would be more tax efficient to leave your pension invested and use other assets first. You should check with a wealth manager about how this affects you.
4. Ask if you can afford to retire early
The UK Regulator, the Financial Conduct Authority (FCA) says consumers rarely considered ’any of the broader issues around how much they would need to live off’. This is all too true around the world and good advice is vital.
Many people want to retire early, but it is important to ensure that doing so won’t leave an income shortfall later on. Income requirements are thought to follow a ’u-shape‘ in retirement. The first phase is the most exciting and therefore the immediate focus. This is where people start to enjoy retirement – and the risk is that they get carried away with their spending, which then falls as they slow down. But it is important to remember that your costs may rise later in life due to health issues.
You should have a plan in place to see you all the way through retirement. Don’t just focus on the here and now.
5. Consider your housing wealth
Many people have a good deal of their wealth tied up in their home, but accessing it is not simple. However, it is possible to access it through equity release schemes or downsizing.
Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
In an increasingly complex and competitive world, expert financial advice is key to securing your future. So, contact us today for a free financial planning consultation and get all your financial affairs in order
Pensions and investments may fall as well as rise in value and you may not get back what you put in.
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