5 top retirement planning tips to help you feel more confident about your financial future

If your life is busy and you’re constantly juggling competing commitments, it might be easy to push matters such as retirement planning to the bottom of your to-do list.

And yet, the confidence you feel in your financial future could significantly affect your financial wellbeing and overall mental health.

Unfortunately, the current economic climate of “sticky” inflation and higher interest rates might contribute to feelings of uncertainty about your financial security.

Indeed, research published by This is Money has revealed that half of adults in the UK are worried that their pension savings won’t be enough to last them through retirement.

So, if you’ve been putting such concerns to the back of your mind, Mental Health Awareness Week in May and Wellness Day in June present a great opportunity to bump your financial and mental wellbeing to the top of your list of priorities.

Read on to discover five top tips for retirement planning that could help you feel more confident about your financial future.

1. Consider when you want to retire

Deciding when you want to stop working is an important first step towards ensuring that you have enough money to fund your retirement.

Your retirement age combined with your life expectancy will affect how long your retirement funds need to last.

According to the Office for National Statistics’ life expectancy calculator, a man aged 50 today has a life expectancy of 84 years, and a 50-year-old woman could expect to live to 87 years old. However, there’s a 1 in 4 chance of both living into their 90s.

So, imagine that you retire at 55 and live until you’re 95. Based on your current financial plan, are you likely to have enough income to fund the retirement lifestyle you expect for 40 years? If not, you may need to reconsider your retirement age or adjust your financial plan.

It might also be helpful to consider when you could access your pensions.

The State Pension Age – which is the earliest you can claim your State Pension – is currently 66 for men and women, but for those born after 5 April 1960, it is gradually increasing.

However, you can usually access any workplace or private pensions from the normal minimum pension age of 55 (rising to 57 from 6 April 2028). So, if you want to retire when you reach 50, you would need to draw on assets other than your pension for an income.

2. Calculate how much retirement income you might need

Once you’ve decided when you want to retire, it might be helpful to think about what you want to do in your retirement.

Have you been dreaming about extravagant holidays or buying a second home? Or are you impatient to buy a new car? Aligning your retirement wish list with your financial plan could help ensure you have the income you need.

It’s also worth considering how your spending may change during your retirement. The “retirement smile” suggests that your spending might be higher at the start of retirement as you rush to fulfil your dreams, before dropping as you settle down, then increasing again in later life as extra costs, such as healthcare, arise.

This might seem complicated. Fortunately, a financial planner can help by using cashflow planning to give you a clear understanding of your retirement income needs, factoring in changes in spending habits, inflation, and so on.

Read more: How a financial planner could help you enjoy a long and happy retirement

3. Take stock of your pension savings

Over the course of your working life, you might have accumulated significant pension savings that could be a valuable asset in your retirement.

And yet, according to research by Standard Life, 75% of UK adults don’t know how much is in their pension pot.

A financial planner can help you take stock of your pension savings, understand how much State Pension you might be entitled to. They may also be able to help you locate any pensions you might have lost track of as you moved between employers.

They can also offer guidance on how to make the most tax-efficient use of your pension benefits, whether you intend to draw a retirement income from them or pass them on to loved ones after you’ve gone.

4. Review other potential sources of income

Once you’re on top of understanding your pension assets, it’s time to consider any other potential sources of income you might want to draw on in retirement.

These might include:

• Cash savings
• Tax-efficient savings held in an ISA wrapper
• An investment portfolio
• Income from property
• Part-time, freelance, or consultancy work.

If you plan to continue working after you retire, you might want to give careful thought to when you start drawing flexibly from your pension, as this could trigger the Money Purchase Annual Allowance (MPAA).

The MPAA reduces your future tax-efficient pension contributions to £10,000 each tax year. This is significantly less than the £60,000 Annual Allowance that most people enjoy – your Annual Allowance may be lower if your income exceeds certain thresholds.

Indeed, there’s a lot to consider when planning for your retirement, so you may benefit from seeking professional financial advice.

5. Speak to a financial planner

If you’re feeling anxious about planning your finances to support the retirement you want, a financial planner can help restore your confidence by providing objective guidance based on data and experience.

They can work with you to create a bespoke financial plan that fits your unique circumstances and retirement goals.

Get in touch

If you’d like to create a long-term plan that helps you feel more in control of your finances, we can help. Please email hello@bluewealth.co.uk or call us on 0117 332 0230.

Please note

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

Blue Wealth Ltd is not responsible for the accuracy of the information contained within linked sites.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.