By Alice Doyle –
If you have passed your mid-fifties, the chances are that you are thinking about retiring. You may be looking forward to a different pace of life and a new range of interests to occupy your mind and your time. If so, it might come as a shock to discover how your standard of living will be affected – you will be better prepared if you have done some hard thinking and planning a few years ahead.
Make a List
The first thing to do is to list your assets and your potential sources of income. Be sure that you know what pensions you are owed. The number of retirees who have worked consistently for one employer is falling rapidly and you may need to dig around in your records to establish who is responsible for paying each pension and how much you are due. Get a forecast for your state pension from the DWP.
List your assets. If you have major savings outside your pension you should probably get advice from an independent financial advisor. Otherwise, list what you have in savings and get an estimate of the current value of your house, if any.
Draw Up a Budget
Most people want a solid source of pension income to pay for their essentials at least. When you have established roughly what your pension(s) will come to, make a realistic budget for what you expect your outgoings to be. You will save on some things, like the cost of travelling to work; but you will incur other expenses, like heating your home during the day. Be realistic, but if in doubt overestimate your costs.
If you find you have plenty to cover your costs, then you can start to plan the luxuries. If you find that there will be a shortfall, look at possible ways to cover it.
Decrease Your Expenditure
Are all your essentials really essential? Are you sure you will need two cars? How many holidays can you expect?
Aim to enter retirement with your debts paid, especially if you have a poor credit rating. It is easier to borrow from specialists in bad credit like Everyday Loans if you are in work.
Increase Your Income
Carry on working longer. This will allow you to continue to pay into a pension and to start drawing it later, both of which will increase your income when the time comes.
Make extra contributions to your pension, or pay in a lump sum. With a work pension, your employers may also have to increase their contribution. There are various ways that you can take advantage of the tax benefits of pension savings, even if your earnings are low.
One possibility that would both increase your resources and lower your expenditure might be to downsize your home.
Things are not easy for people approaching retirement. The state pension age is rising and annuities are paying very poorly. With careful and realistic planning, you may still have time to put your finances in order for the great day.
Alice Doyle is a personal finance advisor for those approaching retirement age. She shares some invaluable information online in her articles.