It’s what we all dream of: a well-earned and comfortable retirement, secure in the knowledge that our expenses can be met without a salary to fall back on. Cue images of Portuguese golf trips, cocktails on the beach… or maybe just a quiet life, with plenty of time to spend with your loved ones. Whatever your vision, one thing is certain – most people haven’t put enough thought into how they will pay for it!
The State Pension is currently £185.15 per week, but not everyone will be entitled to the full amount. And even if you are, this is well short of supporting what most people would consider a ‘comfortable’ lifestyle. Fewer and fewer people are in Defined Benefit pension schemes, meaning that most of us won’t be able to rely solely on retirement income to meet our needs.
There is a growing culture of people ‘sticking their heads in the sand’, hoping that things will somehow work out, and anyway, isn’t retirement years away? Well, it may be, but at Evolution, we like to think long-term. Nothing makes us happier than helping our clients progress into new life stages, and entering retirement may be the trickiest to get right.
Cashflow reviews
The starting point when it comes to retirement planning is the Cashflow. In simple terms, we look at your income, expenses, and assets, and figure out whether you will be able to meet your costs in retirement. On our end, things are more complex – we use sophisticated tools to factor in things like investment growth and taxation, as well as modeling ‘what if’ scenarios (e.g. Could your plan survive a 2008-style market crash? Can you afford to move into a more expensive house?).
Once we’ve modelled the Cashflow, we’ll arrange a meeting to discuss the results. If you come up with a positive Cashflow, then great news – you’ll be able to finance your retirement plans! In that case, you might find that certain things may be more affordable than you thought. This could include simply spending more on your lifestyle (and enjoying a bit of peace-of-mind). It could also include finding ways to pass on parts of your wealth to your family – if you have excess assets that you won’t need to draw upon in retirement, we have a variety of options for passing them down in an IHT-efficient way.
If you find yourself facing a shortfall, then we can provide advice on how to make sure that you aren’t wanting later in life. This doesn’t necessarily have to involve ‘tightening your belt’ and accepting a lower level of spending: we might recommend a more aggressive investment strategy, aiming to grow your investments so that you have more to draw from. Other options might include remortgages and Equity Release, which our Mortgage experts can advise you on. As always, it’s better to address these things earlier rather than later.
Building your retirement pot
Depending on how close to retirement you are, we can recommend new policies and investments to help plan for your retirement needs – building a nest-egg without lowering your current standard of living. Again, the best advice is to start planning as early as possible – a wise man once said that compound interest is the most powerful force in the universe, and it can be truly astonishing how investments can grow if you hold them long-term.
Although the State Pension is unlikely to cover all of your needs, it is nonetheless a valuable aid to financing your retirement. As you may know, however, not everyone has made sufficient National Insurance contributions to receive the full State Pension. We can advise clients on how much State Pension they will qualify for, and examine whether it is affordable to top up their contributions.
Income planning
Once we’ve figured out how to get you in a secure financial position for retirement, we can also guide you in how to take the income. There are lots of things to think about, for example:
Which providers should I use?What policies should I be taking my income from, and when?What is the most tax-efficient way to take this income?What income levels do I need?
This can be a complex process, and one that may be different each tax year. We will guide you through the most effective and tax-efficient ways to fund your retirement. This is where the ‘ongoing’ nature of our service really comes into play – we don’t run on a ‘one-size fits all’ basis, and understand that needs and circumstances are likely to change.
Parting thoughts
So there’s clearly a lot to think about, and we’ve only scratched the surface, but don’t panic! We’re here to guide you every step of the way – and we promise that when the time comes, and you find yourself ready to sink into a comfortable and fulfilling retirement, you’ll be thankful that you took the time to plan ahead.
If you would like to discuss your retirement plan, please Contact us here.