In 2020, more than 500,000 people will reach state pension age, according to calculations by Legal and General, based on ONS Mid Year Estimates for 2018, released in 2019. From learning new skills and exploring the world, to caring for loved ones or retiring for work due to health reasons, there are countless reasons why a person will retire.
“Some continue to work, others go back to college, some start a business, and many take up a hobby. With people living longer and pension freedoms having brought more autonomy, those approaching retirement need to take time to consider what they want from this exciting chapter.
“As a starting point, it’s worth thinking about these seven considerations, and setting aside some time every week to think about what works for you and your family.”
In a bid to help people navigate this milestone, Ms Byron has highlighted seven things to consider at this stage of life.
1. Thinking about the shape of your retirement
“Retirement is no longer linear,” she said. “Some people continue to work into their 70s, while others jump at the chance to slow down.
“For some it’s unpredictable and overwhelming, for others it’s a positive experience, with many new opportunities.
“Whatever you decide, spend time mapping out a plan. Without this, many people can experience a loss of identity and a lack of purpose.”
2. Getting your finances in order
“If you have had multiple jobs over your lifetime, the likelihood is that you have multiple pension pots.
“The first step is to trace any lost and forgotten pension pots, find out what you have, and think about whether you want to bring them together under one roof.”
3. Making a budget
“Once you know how much money you can access in retirement, think about the lifestyle you want and how much income you need to fund it.
“The Legal & General Retirement Calculator help you work out how much your pension could give you, based on your age. You can then add any other savings or investments into the mix, as well as the state pension.
“You can find out what you will receive by getting a state pension statement.
“When budgeting, consider any potential changes to spending habits, and factor in likely reduction in income. Small reductions across the board can really add up. While learning to manage your finances won’t necessarily result in more income, it will help you make the funds you have available go further.”
4. Thinking about how to make your money last
“The reality of planning for retirement in a post-pension-freedom world is complicated.
“There are so many options now, and thousands of people are accessing their pensions without planning. Don’t be one of them. Not having a plan could leave you short of funds in later life, or even see you become overly modest with the amount you access.
“Either way, the result is the same: you can’t enjoy the retirement you really want. For starters, check your life expectancy using an official calculator and plan for the longest life possible, not the average.
“It’s only an estimate, but you’ll have a much clearer idea of how long you will need to fund your basic living costs.”
5. Considering ways to boost income
“There are various ways that you can boost your retirement income, if you feel your pensions savings are not adequate.
“The obvious option is to delay your retirement. Not only will this mean receiving an income for longer, it also means you can defer your state pension.
“For people reaching the state pension age after April 6, 2016, your state pension will increase every week you defer, as long as you defer for at least nine weeks.
“It will increase by the equivalent of one percent for every nine weeks you defer. Alternatively, you could consider a slower transition into retirement, steadily reducing the number of hours you work so that your income stream doesn’t stop so abruptly.
“Part-time work and turning a hobby into an income can also help you adjust to this new chapter in your life.”
6. Thinking about the family home as a valuable asset
“Releasing cash from your home is another way to boost income in retirement.
“One option is to downsize; moving to a smaller, less expensive house. There will be costs involved and of course the upheaval to consider, but after paying moving costs and stamp duty, there could be money left over to use as you wish.
“The other option is releasing funds from your home while you still live in it, by securing a loan against the property such as equity release.
“While this is not right for everyone, it can make a difference to homeowners in the first decades of their retirement. If you have an extra bedroom in your house, you could also consider letting the space out, or making the room available on Airbnb.”
7. Considering advice
“When planning for retirement, consider taking financial advice. You will be faced with a series of complex decisions that can shape your income for the rest of your life, and the support of an adviser will make navigating these choices much easier.
“If you are unable to afford financial advice, then it is important to at least book an appointment with Pension Wise or the Money Advice Service.”