Ten years is a long time – back in 2005 James Blunt told the world You're Beautiful, and Tony Christie and Peter Kay asked Is This The Way To Amarillo? Clint Eastwood's Million Dollar Baby and Martin Scorsese's The Aviator dominated the Oscars, Pope John Paul II passed away and Tony Blair was elected for a historic third term.
But in retirement planning terms, 10 years can be the blink of an eye. If you want to retire in 10 years, it’s important to start taking concrete steps now to ensure you have the best chance of achieving the lifestyle you want. This is especially important given the major changes to the pension system that came in earlier this year. If you’re planning on retiring in the next 10 years, here are a few things to consider.
Get a rough idea of what you want and need to live on
It is difficult to work out an accurate figure of how much you will need to live on in retirement, but it may be worth calculating your current living expenses and thinking about what will change when you stop working and comparing this to your current expected retirement income. If you find that there is a potential gap between your spending and possible retirement income, you will need to look at how you can increase your income and/or cut costs.
Review your finances
If these haven’t been reviewed for years, it is important to find out if your money is working hard enough to help meet your retirement goals, or discover if any changes need to be made. Taking financial advice will help you understand your options before you decide which route may be best for you.
Prioritise other financial commitments
A mortgage is usually the single biggest monthly household cost and could be a considerable drain on your income in retirement. If you have a mortgage or other debts, it may be a good idea to pay these off before you retire. You may also want to consider updating your Will at this point. It is important that you assess any financial concerns you have that may impact upon your retirement.
Work as a team
If you have a partner, it is worthwhile sitting down together and discussing what you both want from retirement. Avoiding such conversations now is likely to create a bigger issue financially in the longer term. By working closer together and having open and frequent discussions about retirement planning, you can help build the lifestyle that you both want.
What will you do under the new freedoms?
As of April, members of defined contribution schemes can fully access their funds and withdraw as much as they wish, however, it’s important to be aware that there are tax implications in doing so. It’s worthwhile considering whether you would like to take your money in one lump sum or regularly in retirement, as this may have an impact on how you invest your pension pot over the next 10 years.
Traditionally, in the five to 10 years from retirement, your pension pot would be switched gradually from equity based investments into bonds and cash based funds, to protect the value of your investment. But this may not be suitable if you intend to stay invested and take an income partially from any investment returns.
What’s your state pension and other entitlements
It’s a good idea to find out what you can expect as income in retirement – you can find out your State Pension entitlement by filling in a BR19 form and as you approach state pension age you will receive a statement telling you what you can expect under the New State Pension, which comes in from April 2016.
If you have changed jobs over your working life and paid into your employers’ pension schemes, you may have built up pension entitlement along the way. Contact the pension trustees of your past employers to see your entitlement. If you can’t remember or can’t find the details of past employers then the Government’s Pensions Tracing Service can help you track down ‘lost’ pensions.
Think about taking financial advice
If you are retired or approaching retirement you should consider taking professional financial advice to help you make the right choice for you. You can find financial advisors in your area through the website Unbiased.
Are you planning to retire in the next 10 years? What’s been your main concern? Lets us – and others – now your experiences in the forum.
This article has been commissioned by retiresavvy and any opinions voiced are the author's own.
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