Deciding when to retire is one of the most important choices you will ever make, but too many people have had their heads in the sand when it comes to retirement planning.
According to a 2014 report on retirement readiness by Aegon, a life insurance company, two-fifths (39%) of UK workers have no plan for their retirement, while less than a third of workers (29%) think they will be able to enjoy a traditional ‘full’ retirement without needing to work.
If you’re approaching retirement age and haven’t started planning for retirement, there may be steps you can take to help.
Review your situation and goals
The first thing to do is take stock of your situation and review your goals.
Examine your finances and consider when you can afford to retire, looking at what you’ll need to live on in retirement. Although you might not be spending as much on petrol through no longer travelling to work, other outgoings like holidays, travel and debts mean you may need more than you think.
Is it feasible to retire when you originally planned? Talk to your partner and work out a plan that you are both happy with. You might need to reassess the kind of lifestyle you can expect in retirement.
What pensions or other savings do you have?
If you have paid into your employers’ pension schemes over your working life, you will have built up some pension entitlement on the way. If you have changed jobs, get in touch with the pension trustees of your old employers to find out what you are entitled to.
If you can’t remember or can’t find the details of past employers – they may have moved or merged over the years – then the Government’s Pensions Tracing Service can help you track them down. The free service searches through the records of 200,000 schemes, but it’s up to you to get in touch with the schemes once they’re found and claim your pension.
What is your state pension entitlement?
For many people, the State Pension will be the main or only source of income in retirement. Aegon’s UK retirement readiness report found nearly one in ten (8.8%) of workers – over 3.3 million people – plan to rely solely on the State Pension.
The Basic State Pension is currently worth £113.10 per week, although this will rise to £148.40 per week in 2016 (in today’s terms), for workers with a full 35 years of National Insurance Contributions or other qualifying benefits.
To find out your State Pension entitlement you can fill in a BR19 form. The government is also introducing personalised State Benefit entitlement statements for people who will reach the State Pension Age between 2016 and 2021.
Bear in mind that the State Pension Age is due to rise - by November 2018, it will be 65 for both men and women, and it’s set to rise to 66 by October 2028 so make sure you factor this into your retirement planning.
Will you keep working?
If you can’t afford – or don’t want – to retire, then you’re not alone. According to Aegon, half (50%) of UK workers expect they will have to work into later life.
If you’re currently employed and approaching pension age, your employer can’t force you to retire – except under certain circumstances – so your retirement date is largely up to you. Working in retirement can range from cutting your hours and working part-time either with your current employer or in a new job, taking on a consultancy role, or starting your own business.
Finally, as you approach retirement, you may wish to consider reviewing your finances, including considering paying off any debts such as mortgages or credit cards, or saving as much as you can into pensions. There are other savings products like ISAs you could consider making the most of too. You should decide which option is most suitable for your own circumstances, but you can save up to £40,000 a year in pensions or £15,000 in ISAs.
Increasing your savings in the run-up to retirement can make a big difference to what you can expect to live on in later life.
You may also want to seek independent financial advice or have a retirement planning review to give you an idea about your financial situation and the options available to you.
This article has been commissioned by retiresavvy and any opinions voiced are the author's own.