3 Financial Planning Tips for People Nearing Retirement

Retirement is something most people look forward to. It’s a chance to kick back and do the things you always dreamed of doing, like traveling with your significant other, taking up new hobbies, and spending more time with the grandkids. Unfortunately, with the cost of living rising, for many people, retirement is an exercise in frugality. They simply don’t have enough money to live a comfortable life, despite working hard for decades.

Don’t Leave it Too Late to Make Plans for Retirement

Financial planning is a good way to prevent a lack of money from ruining your retirement plans. Don’t leave it until the day you retire to check how much income you’ll have. Start putting plans in place several years in advance, preferably several decades in advance!

It’s usually best to consult a financial advisor well in advance of retirement. They’ll be able to offer you pensions advice if you don’t have one and offer specialist advice on how to maximise your existing pension fund. Look for Financial Advisors London to see which firms are available.

How Much Money Do You Need in Retirement?

To put reasonable plans in place, you need to know how much money you will need once you retire. Most people find their living expenses are lower when they retire. By then they have paid off the mortgage, the kids have left home, and they don’t have significant debt. They’re also not commuting any longer, so transport costs are lower. 

Look at your day-to-day living expenses and tally them up into essential bills and discretionary spending. Essentials include utilities, food, housing expenses, etc. Discretionary spending is things like meals out, holidays, and gifts for friends and family. 

Consider the lifestyle you want in retirement. If you plan to travel, for example, you’ll need more money. 

How Much Income Will You Have in Retirement?

Look at the income you can expect to receive in retirement. This won’t be an exact figure, but it will give you some idea.

Check the current state pension for your age and NI contributions. You can find this out by visiting the gov.uk website or logging into your personal tax portal on the gov.uk website. 

Look at any private pension pots you have and see if you can get an estimate of what income to expect. Use a pension calculator to work this out. It takes the current pot value, the contributions you make, how many years left there are to make contributions, etc., then churns out a figure. It won’t be 100% accurate, but it does let you know if your pension income is likely to fit your lifestyle. 

Don’t forget also that you might be entitled to state benefits when you retire, such as pension credit and other means-tested benefits. Even perks like a free bus pass can help if you are on a low income. 

Finally, if you think money will be tight when you retire, consider how best you can mitigate this. For example, it might be sensible to downsize to a smaller property or move closer to your family so that you don’t need a car.

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