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Manager - Advice Policy
14 October 2011
With State pension ages increasing over the next few decades for everyone, and rather more swiftly for females, I am sure many people will be considering deferring their retirement. Being able to retire is merely down to having enough money to live on for the rest of your days so when you retire should not necessarily be governed by when State pensions start to be paid. Some of your income will certainly be provided by the State but if you make the right plans retirement at earlier ages can be an achievable goal.
For those lucky enough to still have final salary pensions, do you know what income they will provide and at what age you can start to take benefits? Will this income be sufficient for you? If not you may need to save additional funds to at least tide you over until your State pension starts to be paid.
If, like many, you have money purchase pensions then assessing what will be paid is more difficult. Certainly with annuity rates falling further off the back of the latest announcement from the Bank of England that they will inject another £75 billion into the economy the outlook for pension income is not good. However, retirement income is not all about pensions and you can look to top up pension income from other investments that you may have. In fact not putting all your eggs into one type of investment basket is often a good ploy as it gives you different options when you are looking to retire.
The main point is that if you want to retire at a certain age you need a plan and the old adage ‘fail to plan, plan to fail’ is never more pertinent than when looking at retirement. Think about how much income you would need when you retire in today’s money terms. Don’t forget that certain expenses often disappear at this time. Hopefully the mortgage will be paid off and you won’t need to save for your retirement. Also, you will often find that travel and clothing costs can also reduce when you don’t have to go to work, so consider this point carefully. On the other hand you are likely to have more leisure time so do allow some extra spending on that front.
Once you have a figure then it’s just a question of working out what income will come in when you stop work and if necessary whether you have enough in other assets to top this up if required.
If you haven’t considered a lifetime financial plan then I would urge you to do so. This will tell you whether you are on track and if not what you will need to do to ensure that your retirement date arrives on time.
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