How to Prepare for Retirement: Retirement Planning Checklist


The typical retirement has changed over the years and with the way that people are now working, and changing jobs more frequently, pensions work differently to how they did for previous generations. With fewer Final Salary and Defined Benefit pensions, there is less certainty around when you retire and how much income you’ll receive. 

Through advances in medicine, life expectancy has steadily been increasing. However as a result,pensions are being squeezed as people are reliant on them to provide an income for longer. As a result, many people are entering retirement with a degree of flexibility by gradually reducing their working hours over time and perhaps supplementing income with their pensions. Some people choose not to retire completely and others choose to continue working to maximise income and for the purposes of enjoyment!

This illustrates the importance of a thorough and meticulous approach to retirement planning.

How to prepare for retirement

When thinking about how to prepare for retirement we can break it down into three key phases:

  1. Building your retirement savings throughout your working life
  2. Approaching retirement and accelerating pension growth 
  3. How to take an income when you reach retirement and continue growing your savings

Let’s take a closer look at each of these phases.

What is the first step in preparing for retirement?

The first step in preparing for retirement is understanding how much income you’ll need. There are many factors to consider when calculating how much you’ll need including what age you plan to retire, the lifestyle you want, what your outgoings will be, whether you might receive potential windfalls, how inflation will impact your savings, and much more. 

Once you have a good idea of how much income you’ll need in retirement, you can work out how much you should be contributing to your pension each month to reach your retirement goals. 

Regular pension reviews are essential for keeping track of your retirement savings and pension performance. If you haven’t reviewed your pension for several years it’s possible that your investments are no longer aligned with your appetite for risk and your pension value might not be as high as you require.

How to prepare for retirement in your 50s

If you’re approaching retirement within the next 5 to 10 years it is highly recommended that you review your pensions and their performance. You want to ensure that your investments are working hard throughout the whole pension accumulation journey, and the earlier you review these the better the returns you should receive in the long run. It is also imperative that you are investing your pension correctly for your attitude to investment risk in the few years before you begin to take an income. And if your circumstances allow, you may consider increasing your pension contributions to accelerate growth.

How to take an income in retirement

Before you retire it’s important to consider how and when you’re going to take an income. People spend decades saving their hard-earned money to support them throughout later life, but not everyone uses their retirement savings in the most efficient way. Some people make very costly mistakes that jeopardise their standard of living throughout retirement. However, such mistakes can be avoided through careful retirement planning.

In the few years before you retire you want to understand your income options. For example, you might have cash savings, a Stocks & Shares ISA and a pension. Deciding which one to draw from first is really important because it can affect your tax liability. For some people, it might make sense to take their tax-free pension cash first, but for others it might be more beneficial to access their ISA. There are many factors to consider that are dependent on individual circumstances. It’s best to speak to a financial adviser who can carefully explain your options and the tax implications of each. 

It’s important to note that the longer you can leave your pension untouched the more potential it has to grow in a tax-efficient way and the larger your tax-free amount could be. By keeping your funds invested your savings can continue to grow and could potentially last you longer.

There is a lot to think about when it comes to retirement planning. Here is a checklist that summarises the key things to consider…

Retirement Planning Checklist

  1. Work out how much income you’ll need throughout retirement.
  2. Work out how much you should be contributing to your pension and retirement savings to reach your retirement goals.
  3. Review your pension performance regularly to ensure you’re on track.
  4. Understand your income options and the most tax-efficient way to begin taking an income throughout retirement.
  5. Keep your funds invested while taking an income to continue growing your wealth, benefit from the effects of compound interest, and ensure that your money lasts.

A financial adviser, like the team here at SN Financial, can help you prepare for retirement. We have the knowledge and expertise to put together a tailored retirement plan that is aligned with your goals. Please don’t hesitate to give us a call. 

The value of your investments can go down as well as up. Past performance is no guarantee of future performance. 

More News