How to financially prepare for retirement

In order to have a comfortable lifestyle when you retire, it is necessary to prepare a plan for how you will be able to receive a good retirement income.

The state pension

When you reach retirement age, you are entitled to a state pension, but you will need more income. The state pension rises each year, but the amount you receive will not be enough for you to live on without drastically cutting back on your spending. You may receive enough to provide basic food and enable you to heat your home, but it will severely restrict your social life and spending choices.

Workplace pensions

Most workers are now enrolled in a workplace pension scheme. Both workers and their employers contribute to the scheme, with contributions being tax free. Many schemes will enroll employees using minimum contributions. Unless you are on a very high salary, the amount of income the workplace pensions scheme will produce could be low. There are two things that can be done about this: increase contributions and invest in other schemes.

Some companies are generous and will match any increased pension contributions by increasing their contribution as well.

If you are self-employed, it is advisable to contribute to a self-employed pension scheme.

Other investments

After increasing your pension contributions, you need to do your sums. Firstly, create a target retirement income that means that you will be reasonably financially comfortable when you retire. Then, calculate if your state pension and the income from your workplace pension are enough to reach this target. If not, you need to consider other investment strategies.

Even if your retirement income matches your target income, you may still want to have access to more retirement money.

Individual savings accounts or ISA is a way of earning savings interest tax free. This compares to other forms of savings where you are taxed on the interest. In the 2017/2018 tax year, you can put up to £20,000 in an ISA. The money can be invested in stocks and shares or put into a savings account. The interest can be left in your ISA until you retire.

A lifetime ISA is available for people aged between 18 and 39 who can invest up to £4,000 a year and receive a yearly 25% tax free bonus from the government. The savings can be either withdrawn to buy a first home, or accessed after the age of 60.

Investing in the stock market can be risky, but with good advice can yield good profits.

An alternative to workplace pensions is self-invested personal pensions (SIPP), where individuals have choices over where their money is invested.

Now is the time

No matter whether you are old or young, if you have not yet prepared for your retirement, now is the time to do so. Book a free no obligation discussion with a pensions expert here at Endeavour Financial Planning, who can discuss your options. We can help you and your loved ones enjoy a financially comfortable retirement.

A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation

Auto Enrolment advice is not regulated by the Financial Conduct Authority.

Posted by Mark
2nd October 2017


All blogs and news on Endeavour Financial Planning are for information purposes only and are not intended to provide advice. Please seek the advice of a financial advisor before making any financial decisions.

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