Retirement planning checklist

There is a lot to think about when planning for retirement, and there is no one-size-fits-all approach.

To put yourself in the best position and better prepare for the future, use our checklist highlighting some important points to consider.

Decide when you want to retire

When planning for retirement, your age of retirement is a crucial factor to consider.

In the UK, there is no set age for retirement. However, you have to wait until the age of 55 to access a defined contribution pension. And while there is no set age, the dream for many people is to retire early.

But with life expectancy increasing, we are now spending longer in retirement. As a result, we need to make our pension pots last longer. And the earlier you decide to retire, the longer you need to make your savings last.

Understand how much you need to retire

There is no magic number when we talk about building a retirement nest egg. That is because the cost of retirement will be different for everyone.

To determine how much you will need, you must consider factors such as:

• Your desired retirement lifestyle
• Your retirement age/average life expectancy
• Medical expenses
• Inflation

As a general rule of thumb, for those looking to maintain their current lifestyle, their annual retirement income should be around 80% of their pre-retirement income.

Let’s say your annual income is £200,000 by the time you reach retirement age. That means you would need roughly £160,000 annually to maintain your current lifestyle.

Financial planners use 80% as a guide because you typically have fewer expenses in retirement. For example:

• You have lower housing costs if your mortgage is paid off
• You no longer have to cover costs associated with going to work
• You no longer have to think about saving for retirement

To get an idea of how much you should save, you can use the 4% rule.

The 4% rule is used to determine how much you should withdraw from your retirement fund per year. It is also used to help ensure a steady income that lasts throughout your retirement.

Using the 4% rule, you take your desired yearly retirement income and divide that number by 4%.

Alternatively, you can use our pension calculator below to check you are on track with your retirement savings.

Determine your sources of income in retirement

The next step is to predict your likely income after retirement to better understand if it will be enough to meet your needs.

Pension plans are typically the primary source of income. The two types of pensions are:

• Defined benefit pensions
• Defined contribution pensions

Statements from your pension provider should give a full breakdown of your current pension pot and future projections.

However, there is more than just pension income to consider. Other sources of income may include:

• Investments or additional savings accounts
• Part-time work
• Equity release from your home
• Rental income from real estate investments

Assess your income options

When it comes to accessing your pension, you have several options. Some of the most common include:

• Pension drawdown – This allows you to draw a regular income from your pension
• Lump sum – This allows you to take a portion of your pension as a tax-free lump sum
• Retirement annuity plan – Purchasing an annuity product can provide a guaranteed income for life

Be aware that some of these options provide greater flexibility at the expense of risk. It is always best to speak to an expert to help determine the best strategy for you and your needs.

Review your plans

Planning for retirement is not a one-time thing. It is an ongoing process that requires careful thought and consideration.

For example, reviewing pension choices regularly can help ensure they are performing well and you are on track to reach your retirement goals.

And while you can take the DIY approach to creating a retirement plan, seeking professional financial advice can help you make the most of your money and identify strategies you may have missed.

A financial adviser can also provide the professional guidance and support needed to help you make more informed decisions and overcome complex financial situations surrounding your retirement.

Planning for retirement with Holborn Assets

As we said at the top of this article, planning for retirement could be the difference between the future you want and the future you get.

Remember, the earlier you start, the better prepared you will be. If you are ready to start building towards the future you want, we can help.

At Holborn Assets, we work closely with clients, providing expert advice and support to help them reach their retirement goals.

Remember, retirement is not the final chapter; it’s simply the start of a new one. Start planning today and make sure you are prepared for tomorrow.

Book a free, no-obligation meeting today and learn how we can help you plan for retirement.