While life expectancy is on the rise, the result is that our retirements are also getting longer.
We now expect people to live upwards of 10, if not 20 years into retirement, and that’s no small fry. With cost of living at an all-time high, the costs of retirement have also boomed. That means that more older adults are now on the breadline because they’ve not been able to go into retirement with the financial security that they needed or deserved. So, whether you’re 20, 40, or 60, there is no time like to present to start planning for your retirement.
Pay into a good scheme
In your adult life, it’s wise to pay into a pension scheme. You might work for a government organisation which pays and contributes significant amounts towards your pension. However, if you work for a private firm, it is not yet mandatory for some companies to make contributions, although this is something which is changing across the country this year with auto-enrolment. Many people choose to pay a proportion of their earnings into a private pension, which, in essence, acts as a long-term savings account which also benefits from tax relief. Finding a pension that works for you, if it is not available through your employer or you’re self-employed, is the first step towards ensuring your security in old age.
Build up cash reserves
Not only will you want your pension to draw on, but a bit of cash in the bank for emergencies. While this might come in handy as you age, especially if you need to take time off work on a partial salary for illness or the like, it’s especially useful to offer you a comfort blanket once you get to the age of retirement. When you retire, it is usual that your income is significantly less than throughout your adult life. While this is ordinarily fine due to reduced costs and governmental support, there are still times that a chunk of money could come in handy. Require a new roof, a new car, or just fancy a once in a lifetime world trip? You’ll be grateful for those savings! It doesn’t have to be thousands of pounds – just whatever you can afford throughout your adult life.
Get your head around investments
For many people heading into older adulthood and retirement, there is a sense of security in knowing you have a few, well-placed investments and shares which will pay small amounts. A cash ISA is a good start for cash savings as they are relatively secure and benefit from tax relief, but a Stocks and Shares ISA is most likely better for more long term savings. If you do choose to invest in equities through a Stocks and Shares ISA you should expect some up and down fluctuations and ensure you invest a mixture of funds for diversity, rather than relying on just a few companies or sectors.
Understand your mortgage
It is often advised that people who are taking out a mortgage should aim to have it paid off in full by the time they hit 65 years old, the common retirement age. This is because owning a property outright can offer great financial security and a sense of belonging to older adults. However, it is becoming more often the case that people can take out mortgages which will last well into their 70s, if not 80s, if they can prove to their mortgage lender that they’ll be able to keep up with the repayments. How you choose to do it is entirely up to you and your family, but there is a lot to be said about paying off your mortgage before you’re 65. The key part here is to know what you’re getting yourself into. As long as you’re happy and confident paying off your mortgage, either in full or as interest only repayments after retirement, there are no issues. Some people even choose to remortgage their house on the brink of retirement in order to help it work better with their new cash flow situation.
Cut debt
Going into retirement with debt can be seriously bad news. According to thisismoney.co.uk, nearly a third of all retirees are still paying off loans, credit cards, and mortgages. These debts equal money which retirees are unable to spend on themselves – on food, housing, or quality of life. On the lead up to retirement, or even as an adult in your 30s or 40s, you owe it to yourself to deal with any debt head-on. These debts aren’t just going to disappear once retirement hits, after all. If you’re struggling with debt, and especially if you’re worried about how it will affect you in later life, speak to an advisor about consolidation and repayment, and secure your financial future.
Find an independent financial adviser
As you start to near your retirement, you’ll have quite a lot of assets to organise, and money in all sorts of places. At this point, it’s great to seek professional help. This help can enable you to streamline everything, consolidate pensions, and they’re especially important to speak to if you plan on signing up for an annuity. An annuity essential means you hand over your pension to an annuity provider, and they’ll give you regular monthly payments for the rest of your life. There is also an increased popularity for ‘drawing down’ your pension, which allow the owner greater flexibility and control over their own finances, but this is more complex than an annuity and requires careful planning. That said, it’s usually the most appropriate option and if properly considered and managed can really pay off long term. This isn’t without risk, so it should only be a decision undertaken with the help of an independent financial adviser.
Make retirement plans
Before you retire, it’s obviously a good idea to have plans in mind for both your budget and your lifestyle after your retirement. For example, do you plan on downsizing to a smaller home? Do you ultimately want to end up in sheltered accommodation, a care home, or with a nurse visiting you in your own home? Ensuring all of these desires are written down and discussed with family members can help to put your mind at ease that, as you start getting older, your life and wishes will still be respected. It can also really help to write a retirement budget. Predictions of your income
and outgoings and how they compare can really help you to make decisions based on your pension and your lifestyle.
Make post-retirement plans
Obviously, retirement can’t last forever, and there are some costs which need covering after you pass too. While these costs usually fall to the immediate family, many people prefer to leave money in their will or take out life insurance to cover these costs. Finding a life insurance plan, especially once you’ve reached retirement, can be slightly more difficult, although not impossible. The people at Lifeinsuranceforseniorsover80.com are full of great advice for finding life insurance at this point. It’s also essential to ensure your will is updated, especially as your financial position changes into your retirement. This will can also specify funeral arrangements, and leave money to the proceedings. You will also want to choose the Executor of your will. This person will be in charge of dealing with taxation and distribution of assets. Many people choose to go with a close family member or friend who they believe will act in their best interests throughout the process.
Preparing for retirement isn’t just as easy as paying into a pension plan from the age of 30. There are all sorts of living costs, end of life plans, and debts to pay off. Many people find it best to speak to a financial adviser as they reach retirement age to ensure everything is in place to go off without a hitch, and to put their mind at ease.
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