Retirement do's and don'ts
There are a whole host of things to bear in mind before, during and after retirement takes place – unsurprising, given the importance of the life event. If you want to secure your future and enjoy your autumn years, there are pitfalls to dodge and opportunities to jump upon.
Being in the know is key to practically everything in life, and the same goes for retirement. If you understand the ins and outs of the pension market, your options and so on, then your pension outlook will almost certainly see improvements. You're going to have to learn about it sometime – start now!
Pension products come in all shapes and sizes, befitting different individuals' circumstances and attitudes to risk. As such, it's important to be aware of the pension options available to you. This includes products you interact with while still in employment, such as retirement plans and pension schemes, all the way to post-retirement products, such as annuities.
When we retire, our entire life changes. After decades in a working environment, suddenly we're thrust out into a world of free time and leisure, and while for some this is bliss, for others it's very discomforting.
To ensure that you don't get caught off guard by the social and life-changing effects of retirement, be sure to have a variety of activities lined up to replace the things you're going to lose when you leave work. Think through all of the things that employment gives you, then see how these can be replaced – volunteering, hobbies part time work and other fulfilling activities.
If you choose to self-invest, the investments made with your pension fund matter. As a general rule of thumb, steer clear of investments that combine low reward with high risk, and if you're older, try and minimise your exposure to risk more generally.
Be aware of "investment gurus", don't use your cash to speculate – you'll most likely lose money – and keep an eye on the costs involved with investing, especially if you're with a retirement plan.
…get financial advice
We strongly recommend you seek the help of a professional adviser. Even if you consider yourself a savvy investor, it could pay dividends to get a second opinion. The world of retirement income can be a complicated one. A trusted, experienced adviser can help you choose the right products to maximise your income.
…think about earning extra
Other streams of revenue will really help you out during retirement, so it pays to think about developing a few. This could mean working part time, renting out part of your current home or a second, or putting money in investments such as ISAs.
…leave it too late
The biggest concern for any person who plans on retiring, never mind over-55s, is to ensure that enough money is contained within their pension pot. Too many people can be caught out with a serious lack of retirement income later in life, simply because they didn't save enough money early on in their career.
To guard against this, place a decent portion of your salary away every month. If you're young and simply can't afford to put a few hundred pounds away each month, then save what you can, increasing the amount as your wages rise. Any pension saving – however small – will give you a leg up in later life, especially when employer contributions and tax relief are taken into account.
There is something to be said for saving when you're older, however. Given that you'll probably be paying most tax in your wealthier later working years, saving now can offer you excellent tax relief, giving more bang for your buck.
…forget to check
Although retirement can sometimes seem a rather long while away, even if your funds are ticking along nicely it pays to check on them every now and again, working out the sums and discerning your current position. This allows you to know how much you need to save in the future, and what to expect when you retire, ensuring no nasty surprises later down the line.
…spend your pension too quickly
If you have a drawdown pension, this point is especially important, as without sound planning, you may run out of money before you pass away.
…put all your eggs in one basket
If you have a variety of different pensions, it may be a good idea to combine them into a single one, making access to your money much more straight-forward and manageable. However, you should consider the outcome of putting all your money into adventurous funds – if disaster befalls you’ll have no fall back to rely on. It could be a better idea to spread the risk by investing in different types of funds.
Pensions are complicated, but there's a certain knack to ensuring they work for your future. Don't take too many risks, learn about them and plan as much as possible.
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