A recent report said the average life expectancy in the UK is 81 years.
That’s about 30,000 days to fill with ‘life’.
However, what’s more surprising is by the time we reach 50, there’s only about 11,500 days left and worse still, at 55 that figure’s slipped to just over 9,600 days of ‘life’.
Looking at human lifespan in cold hard numbers like this, makes what we choose to spend our time doing in retirement all the more important, particularly since there’s been so much tragedy following the Coronavirus pandemic.
But how do I choose what’s important?
By planning well and deciding what you really want from life.
Planning for the retirement you want rather than living in fear of running out of money is the key to making the most of those 9,600 days.
But how do I do this?
You first need to look at all the things you’d like to do in retirement.
Are you happy pottering in the garden, or would you rather be bungee jumping in South Africa (lockdown allowing)?
Essentially, it’s about working out what your ‘enough’ is by deciding enough for what?
It’s only then you can see how your money fits.
This is where retirement planning comes into play.
The trouble is, most people work out their retirement based on the bare minimum they need to survive, things like food, warmth and shelter, but all this does is give you the poorest version of your life.
Instead, if you work out what you want to spend your 9,600 days doing, then look at the finances to fund it, you can far more easily find a way to achieve what you want.
But what if I want to retire early?
Well the good news is there’s no rule that says you have to work into your 60s. Pension freedoms mean you can currently access your pension pot from 55. So, if you’ve built a good pension, chances are you’ll be able to access it if you’re 55.
However, there’s more to planning for early retirement than simply looking at your pension pot. You first need to work out what enough money for retirement actually looks like.
This is different for everyone and you might ask yourself questions like:
- What if I retire five years early?
- What if I decide to go on that trip around the world?
- What if I decide to change the kitchen?
All the ‘what ifs’ that could affect your retirement lifestyle are an important part of your financial planning process and key when considering if your pension pot’s enough.
Having said that, it’s still important to work out the rules of what you can and can’t do with the type of pension you have.
If, for instance, you have a Defined Contribution pension, you can usually take a 25% tax free lump sum from your pot.
But, if you have a Defined Benefit pension, sometimes known as a Final Salary pension, the rules of each individual scheme will say whether you can access it early.
It’s possible to transfer out of a Final Salary pension, but if your value’s above £30,000 you’ll need to seek professional advice before being able to do this.
However, if you do transfer out, you’re giving up your guaranteed income for a more flexible cash lump sum, which you can either take as Drawdown or buy an Annuity with.
An annuity can give you a guaranteed income in a similar way to a Defined Benefit scheme, whereas Drawdown is a pot you invest and can take money from when you need to.
What you choose could affect whether you’ll be able to retire early.
But what if I don’t want to retire?
Well that’s okay too.
Remember, it’s all about planning those 9,600 days so you can enjoy the lifestyle you want?
If you want to keep working, then great. There’s no law saying you must retire.
Years ago, companies used to apply a default retirement age, and everyone would retire at this compulsory age. However, this stopped for most organisations in 2011 and now it’s all about the freedom to choose the lifestyle you want.
If working longer is what makes you happy, that’s something we can plan for. It’s also useful to know whether you do have enough to retire, should your circumstances change.
However, it’s worth investigating what the impact on your pension might be if you keep working and draw it. This could be a tax issue and you may end up paying the tax man more money than you need to.
But what about my State Pension?
For the first time, in December 2018, men and women got the State Pension at the same age, currently 65. This is set to rise nationally to 66 in October 2020 and 67 in 2028. Plans are also being drawn up for it to rise to 68 after that.
However, as it currently stands, a couple both getting the full State Pension will get about £17,500 on the new State Pension system. Visit https://www.gov.uk/browse/working/state-pension for more info on the State Pension.
Once you reach State Pension age, you’ll be able to draw it alongside any other pensions you may already be taking. But, unlike your Defined Contribution or Defined Benefit pensions, you can’t access this one early.
Also, as the amount of State Pension you get is based on your National Insurance Contributions, if you do retire early you may not get the full State Pension and could get a reduced amount.
This, again, is something we can plan for. So, if early retirement and maximising your 9,600 days is something you still want, planning beforehand so you know where you stand is a good idea.
But how do I Start Retirement Planning?
This is where we come in.
Helping people get the retirement lifestyle they want through our unique ‘PLAN HAPPY’ process is what we do best.
It’s about using Financial Planning to look at your options and find the right one that maximises your lifestyle, through exploring questions like:
- What do you want to do in retirement?
- What does enough money look like?
- Enough money for what?
- What’s the impact of your decision?
Most clients come to us worried they won’t have enough but often they do and don’t realise it. They just don’t know what ‘enough’ looks like.
We help them find their ‘enough’ and decide what they want to fill their days with before putting it all in place, so all they have to do is go live it, happy they’re not going to run out of money.
Retirement planning is more than just calculating money, it’s about converting those 9,600 days into life – the life you really want.
What will you do with your 9,600 days?
As pension and retirement specialists, we are trusted by many hard-working people across the UK. Plus, as a company authorised and regulated by the Financial Conduct Authority and with the additional permissions and pension transfer gold standard for advice on defined benefit/final salary pension transfers, we are ideally positioned to help people get the retirement lifestyle they deserve.