Planning Your Finances In Retirement
17.01.2018 by Jim Ker
Wondering how to plan your finances now you’re retired? If you have been used to having a regular income, the change can seem a bit daunting, but there are a few ways to make that change smoother and they shouldn’t take you long to put in place. Read our findings below:
Think about all that you spend, including those one-off yearly payments and divide it into the “must haves” and “would like to haves”. It’s important to be honest here and ensure that those sneaky luxuries are not being considered essential when in reality, they’re not. Regular checks of your personal finances are a good way to make sure that there are no forgotten outgoings or nasty surprises.
All those items in the “must haves” pile need to be paid for, but you don’t want to be paying more than you have to. Take time out, make yourself comfortable and see if you can change suppliers to get these services cheaper, or even negotiate a better deal with your current supplier. Use comparison sites, but remember to ring around those companies that may not be as visible on comparison sites as well. Take your time and do your research. Try to do this at least once a year to make sure you always have the best deal available.
Now understand your income
Make a note of all the income you have along with any investments. This includes your state pension and any work pensions.
Make sure that you have no forgotten income. Old pensions can be traced by contacting the Pension Tracing Service on 8045 6002 537 or visiting the Department of Work and Pensions website by clicking here and working through the online tracking process.
It’s also a good idea to look at any additional benefits in retirement that you might be able to claim as the extra income could help in the long run.
Planning your future income is essential
This is where you need to strike a balance between having enough cash available for your everyday, short-term outgoings, but making the most of your longer term investment options to top up the cash pot for future years.
Investment plans may be considered a medium to long-term practice so by locking away some of your money for a longer period, you could benefit from higher bonuses which in turn can increase the amount of cash available to you later. However, this may mean it is not available to you in the short term should you need it.
The best of both worlds
What about those unexpected outgoings? Look for investment options that will allow you to invest for a longer term and make the most of any bonuses or returns with the flexibility to withdraw an income if needed. Some investment options offer a 5% income withdrawal per year with no penalty and no tax liability (until the closure of the investment). This could be used to top up your monthly income, use it for a significant purchase or it could be saved for a rainy day. You can often accumulate these annual drawdowns. So, for example, you could wait until year 3 and draw down 15%.
Considering your financial options in retirement can be daunting. Planning ahead and making sensible considerations early is a great way to reduce your financial challenges. You can get a lot more information and advice on ways to save money and plan for your retirement at the Money Advice Service.