Things to plan for if you're nearing retirement
If you’re finally nearing retirement, first things first; congratulations! Before you can put your feet up and enjoy it though, there are a couple of steps you should take in the years before you stop work, to ensure you have a steady income for the rest of your life.
Estimate Your Retirement Income
The first thing you need to do is to try and figure out how much income you’re going to have once you retire.
To do this, you’ll want to get a State Pension statement from the gov.uk website, which gives you an estimate based on your National insurance contributions.
If you have a defined benefit pension, you should also find your latest statement for this and add it to your state pension as well as taking into account any extra savings or investments that you might have.
Finally, if you think you may have some older pensions which you’ve lost track of, you can use the Pension Tracing Service to try and track them down for free.
You can then use a tool such as the Money Advice Service’s Pension Calculator to work out a rough retirement income.
Ensure Your Pension is Secure
If you have a defined contribution pension, where you regularly build up a pension pot, a lot of your money is going to be tied up in investments, so as you near retirement age, it might make sense to start to move some of these funds into lower-risk investments.
This should be a gradual process which takes place over the ten or so years before you retire and some pension funds will do it automatically for you. Otherwise, this might be an area where it’s wise to seek some professional financial advice.
Think About If You Can Boost Your Pension
Especially if your estimated income is lower than you’d hoped, you might want to think about some small ways that you can boost it.
While you won’t be able to make a huge difference, if you can try to pay more into your pension, or push back the date that you start talking out of it, it can help.
For some tips on how to do this, check out this post from The People’s Pension.
Account for Changes in Your Day to Day Life
Your spending patterns are likely to change once you hit retirement, with less money to live on, so you should try to budget for this in advance.
While you’ll be saving money in some regards, such as travelling to and from work and you’ll hopefully have paid off some debts.
But on the other hand, you’ll have more time on your hands, meaning that you’ll be spending more on leisure and you’ll also probably find yourself spending more on heating and healthcare too.
Clear Any Debts
Ideally, you want to start your retirement as debt-free as possible, especially as your income is going to be lower.
Look at any credit cards, loans or mortgages that you have, how much you owe on them and the interest rates on them (try to pay off the ones with the highest interest rates first).
It’s a good idea to seek professional advice on where to take the cash to pay off these debts from, because while many take it from their tax-free pension lump sum, but this can work out to be more expensive compared to the pension income you’re giving up.
Set a Date to Start Your Pension
At some point, you’ll need to set a date for when you start drawing from your pension (bear in mind that you don’t have to stop working at this point).
There’s now more choice than ever about how you can take your pension, whether you want to leave it alone to grow a bit further, convert it into an annuity (taxable income for life), take it as small cash sums, or take the whole thing in one go, it’s up to you!
Again, it’s probably best to get some professional advice on your options on this one.
A Fresh Start?
Once all your finances are in order, you might want to think about starting a new life in the sun.
Many Brits are choosing to see out their retirement here in Barbados, with the year-round sunshine and relaxed pace of life.
You can also easily access your pension here in Barbados, because it’s part of the Commonwealth, and here at Royal Westmoreland we’ve got a great range of ownership options available (and one of the best golf courses in the Caribbean of course!).