Retirement

Planning for an early retirement  

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Living life to the fullest and accomplishing long-held dreams. 

It’s common for individuals to either overestimate or underestimate their lifespan. As average life expectancy gets longer, some people may spend over 20 years or more in retirement. 

Early retirement typically signifies reaching financial autonomy before the statutory pension age, usually in the mid-60s. In the United Kingdom, retirees can begin drawing their State Pension at age 66. However, this retirement benchmark is set to increase to age 67 by 6 April 2028. 

Consequently, the early retirement age could be anywhere in your early 60s. Yet, for most, the concept of early retirement begins at age 55, when individuals can start drawing on their personal or workplace pension savings. However, this age is also due to increase to 57 from 6 April 2028. 

Aspects of Life 

During the early retirement phase, the focus tends to be on living life to the fullest and accomplishing long-held dreams. One’s spending might then reduce as activity levels decline, only to surge again later, possibly due to rising care needs. 

It’s common for individuals to either overestimate their health or underestimate their lifespan. As average life expectancy gets longer, some people may spend over 20 years or more in retirement – over twice our grandparents’ duration. Yet, as with many aspects of life, this depends on luck. 

Complex Calculation 

In fundamental terms, full retirement implies that your lifetime expenses should not surpass your income plus any remaining assets, such as savings and investments. This can be a complex calculation in many instances. It will require you to weigh your pension and other income sources against your expenditure and evolving needs as you age. 

Simultaneously, it’s crucial to consider investment returns and inflation, which refers to the rising cost of living. As we have recently witnessed, everyday prices can escalate rapidly, significantly diminishing the purchasing power of a fixed income or cash savings. 

Multiple Factors 

Embracing early retirement doesn’t necessarily translate to a full-stop on professional life. Instead, many individuals transition into more flexible, part-time roles or switch towards volunteering. This shift allows retirees to sidestep less appealing aspects of working life, such as long commutes or stressful work environments while reaping employment benefits. 

Unfortunately, early retirement due to ill health isn’t a choice but a necessity, creating unique challenges for some. Time constraints limit opportunities to plan and build retirement finances. Additionally, careful planning for care and support becomes a priority. Making the decision to retire early is significant and requires thorough consideration of multiple factors. 

To determine whether you can retire early, you will need to assess your financial standing. This means calculating your total pension pots, tracking lost ones and considering other possible income sources or debts. Additionally, you need to envision your ideal early retirement lifestyle and estimate its costs. 

Assessing your Financial Health 

To begin, you need to calculate your total pension pots. This includes private or workplace pensions and any final salary pensions you might have. If you’re considering early retirement, remember that the State Pension won’t be included in this income. 

Reclaiming Lost Pensions 

It’s not uncommon to lose track of pensions over time. The government’s free Pension Tracing Service can assist if you suspect a missing pension but lack any supporting information. Visit their gov.uk website or phone them on 0345 600 2537. Consolidating your pensions might also be a sensible strategy. 

Understanding your State Pension 

Check up on your State Pension to understand how much you’ll receive and when the payments will start. This is crucial for your overall retirement planning. 

Identifying Additional Income Sources 

Consider other potential income sources after retirement. This could include savings and investments, property ownership, or even starting a part-time job or your own business. 

Managing Debts and Loans 

Take stock of any outstanding debts or loans. Consolidating them could potentially expedite their clearance. Set a specific date to pay them off entirely. 

Estimating Retirement Income 

We can help you estimate your retirement income and offer valuable insights into your financial future. 

Envisioning Your Retirement Lifestyle 

Next, plan your essential retirement spending by mapping out mortgage repayments, utility bills and other necessary expenses. Then, envision your ideal retirement lifestyle. What do you want your life to look like once you’ve retired? How much will it cost? 

Factoring in Responsibilities 

Consider any responsibilities that might impact your retirement plans. Will your children still be dependent on you? Might you need to care for older parents or relatives? Are there any other responsibilities you should bear in mind? 

Deciding Where To Live 

Housing decisions are a crucial part of retirement planning. Do you want to stay in the same house, release equity with a lifetime mortgage, move somewhere new, downsize and release some money, or even move to a cheaper region and upscale? 

Estimate Retirement Spending 

Finally, combine all the above factors to estimate your total retirement spending. There’s a lot to consider here. But as you work through it, you might realise that you’re more prepared to retire early than you initially thought. 

If you are considering early retirement and would like professional retirement advice, please get in touch:

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When am I financially ready to retire?

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The earlier you start retirement planning, the better. However, with the demands of managing a busy working and personal life, this is something that can understandably be neglected. But it’s never too late to think about saving for retirement – even if you are planning to give up work in just a few years’ time, you will have options to add to your nest egg.

In our latest video, Financial Adviser Gary Davies discusses how to know if you are financially ready to retire.

If you are considering early retirement and would like to speak to a Financial Adviser, please get in touch:

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What do you need to consider when planning an early retirement?

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There’s a lot to consider if you are planning an early retirement. But as you work through it, you might realise that you’re more prepared to retire early than you initially thought. 

If you aspire to retire early, it’s vital you plan your finances to be sustainable for the long term and our expert team of Financial Advisors are here to help you every step of the way.

If you’d like to speak to us about early retirement, please get in touch:

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Navigating the ins and outs of Retirement Planning

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The past few decades have witnessed significant transformations in retirement planning. The security of a fixed income from a final salary pension is now a rarity, and eligibility for the State Pension now comes at a later age.

The sooner you initiate your retirement planning, the higher your chances are of amassing sufficient savings to maintain your desired lifestyle post-retirement.

We have produced a guide to Navigating the ins and outs of Retirement Planning to help you begin your financial journey:

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Are you going to achieve your financial goals in your lifetime?

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People who are confident about their retirement are most likely to have specific retirement goals and know what steps they need to take to reach them. But sadly, we see many people do not feel confident that they will have enough savings to live comfortably after they retire.

Many people have a fear of outliving their money, but most don’t have a clear idea of how much money they need during retirement. It’s important to remember that retirement doesn’t happen at a certain age, it happens when you have enough money to live on.

We are here to help create a clear direction and understanding which will give you peace of mind that you are on the right track.

If you’d like to discuss how to reach your retirement goal, please get in touch:

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Time to kickstart your retirement plans? 

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Time to kickstart your retirement plans? 

Retirement signifies a well-deserved achievement, a significant turning point in life. It should be a period of anticipation and joy, an opportunity to indulge in activities that bring happiness and contentment. Currently, retirement is marked by increased flexibility in accessing your pension savings. While this offers many choices, it also gives rise to numerous queries. 

Retirement planning, accompanied by crucial decision-making and understanding various options, might seem daunting, especially with the escalating cost of living affecting several financial plans. This is where the value of professional retirement advice comes into play. We can help you simplify major decisions by clarifying your options, instilling confidence in your choices and ensuring they are beneficial and tax-efficient. 

Retirement Lifestyle 

With the UK witnessing record-breaking inflation in food and fuel prices, the rising cost of living undoubtedly influences our financial plans. If retirement is on the horizon, apprehension about increasing inflation, interest rates and the potential impact of the cost of living crisis on your retirement lifestyle is quite natural. 

We can guide you in such circumstances and assist in determining an achievable retirement date based on your total income and expenses. When you include all your potential income sources, not merely your pension savings, you might discover the possibility of retiring earlier than anticipated or gradually reducing work hours before fully retiring. Even if immediate retirement is outside your agenda, we can help you understand when you can afford to retire. 

Income Sources 

We’ll work with you to analyse all your income sources to estimate your possible annual income post-retirement while ensuring you have sufficient funds for as long as you need. Income sources will likely include pensions, your entitlement to a State Pension, and any savings or investments like Individual Savings Accounts (ISAs). Rental income from a buy-to-let property may also be an option, in addition to any equity in your home that you’re willing to release, either through downsizing or equity release. 

As your retirement may last 30 to 40 years, ensuring your income lasts throughout this period is crucial. As we’ve witnessed over the previous few years, inflation rates have reached double-digit figures, so ensuring your money is working hard for you is more important than ever. 

Beat Inflation 

Investing a portion of your money during retirement also offers growth and an opportunity to beat inflation. This is where our professional advice is essential, helping to ensure your money is invested wisely and that your investments align with your retirement plans. However, remember that investments can fluctuate in value, and you may get back less than you initially invested. 

Overpaying taxes in retirement is another common pitfall. For instance, if you withdraw more from your pension savings than necessary, you could pay more tax than required. 

We can guide you through this, ensuring you draw your retirement income in the most tax-efficient way. However, bear in mind that tax laws and legislation can change. Your circumstances, including your location within the UK, will significantly impact your tax treatment.

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Millions may have to rethink their retirement plans

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More than one in ten have mortgage debt in the final decade before they retire

Two-thirds (67%) of Britons admit to having debt that is weighing them down, according to a recent study*. Additionally, nearly one in ten (9%) adults in the UK are unsure about the amount they owe in outstanding debts, rising to more than one in six (16%) among those aged 45 and over.

Credit or store card debt is the most common form of debt, accounting for 32% of respondents, followed by personal loans (16%), overdrafts (15%) and unpaid household or utility bills (10%). Surprisingly, more than one in ten (11%) individuals aged 55 and above have mortgage debt in the final decade before retirement.

Impacting retirement plans and financial security

Having debt can significantly impact retirement plans and financial security, leading to increased stress and reduced income in retirement. Taking proactive measures to reduce debt before entering retirement is essential. These actions include consolidating debt, paying off high-interest loans, reducing unnecessary expenses and working with financial advisers to create a comprehensive retirement plan.

Funds to cover unforeseen expenses

Comparing results from 2021 to 2023, the survey found that debt has increased among 52% of 45-54-year-olds. However, respondents have also tried to address their debt situation, with 38% cutting back on non- essential spending, 21% working overtime or getting a second job, and 13% seeking advice from debt services or helplines.

Furthermore, unexpected bills have posed challenges for many individuals, with 31% of Britons paying an unexpected necessary bill of £850 or more in the past 12 months. While 57% of UK adults claim to have emergency savings, only 24% used these funds to cover unforeseen expenses.

Importance of managing debt effectively

Instead, 19% relied on credit cards, 11% sought help from family or friends, and 8% took out loans or used their overdraft. Additionally, 5% resorted to payday loans, and another 5% cashed in their pensions to manage unexpected costs. These findings highlight the importance of managing debt effectively and planning ahead to ensure a secure financial future.

Looking for a financial advice tailored to your needs and goals?

Navigating the world of finance can be daunting, with numerous options and decisions to make. That’s where we come in. We offer personalised financial planning and advice tailored to your needs and goals. To learn more about how we can help you, please don t hesitate to contact us.

*Source data: The research was conducted by Censuswide between 20–24 April 2023 of 2,009 general consumers, aged 18+, national representative sample. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.

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Debt and Retirement Planning

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Navigating the world of finance can be daunting, with numerous options and decisions to make. That’s where we come in.

Get in contact to discuss your retirement planning needs:

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Retirement Cash Flow Modelling

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Assessing your current and projected wealth, income and expenses 

Retirement planning is of utmost importance, regardless of your income or wealth. It ensures a steady income stream after retirement and provides financial security for you and your loved ones. 

Retirement cash flow modelling can provide numerous benefits to individuals seeking financial security and planning for the future. By assessing your current and projected wealth, income and expenses, retirement cash flow modelling can help you understand your current and potential future finances. 

Here are some of the key reasons why retirement cash flow modelling is crucial: 

Avoid running out of money: Planning helps you calculate the savings rate required to support your desired lifestyle during retirement, ensuring you don’t run out of money. 

Setting retirement income goals: This involves determining your retirement income goals and identifying the necessary steps to achieve them. This allows you to plan for various financial sources and secure a comfortable retirement. 

Creating a regular flow of income: A well-structured and regularly reviewed plan enables you to create a regular flow of income after retirement. This fixed income substitutes your pre-retirement salary, ensuring financial stability. 

Strategic investment decisions: Retirement planning involves making strategic investment decisions to achieve specific savings goals. This helps in maximising returns and growing your retirement fund over time. 

Financial security: By having a solid retirement plan, you can provide yourself and your loved ones with financial security. This is particularly important as more than social security benefits is needed to sustain your desired lifestyle. 

Enjoying a comfortable retirement: A comprehensive retirement plan has the potential to allow you to enjoy a comfortable retirement, free from financial worries. It provides the means to pursue your desired activities, travel and maintain a high standard of living. 

Reviewing existing pension arrangements: Regularly reviewing your existing pension arrangements and taking the required steps can significantly affect the amount of money you’ll accumulate for retirement. Seeking professional help can ease the process and ensure you make informed decisions. 

How retirement cash flow modelling can work for you 

Managing accumulated wealth: If you have accumulated wealth, retirement cash flow modelling can assist you in effectively managing your financial position and making informed decisions as you retire. Long-term planning: Cash flow planning is especially beneficial if you have long-term personal or business objectives. It lets you determine how much you need to save and the returns required to meet those goals. 

Care home fees planning: Cash flow modelling can also be used for planning care home fees, helping you understand the financial implications of such expenses and prepare accordingly. 

The retirement cash flow planning process involves: 

■ Assessing your current financial situation, including income, expenses, assets and liabilities. 

■ Understanding your future financial commitments and goals. 

■ Creating a lifetime cash flow modelling plan tailored to your needs. 

 ■ Providing a comprehensive analysis of your income, expenditure and potential future cash flow. 

■ Working towards achieving and maintaining financial independence. 

■ Adequately addressing the financial consequences of death or disability. 

■ Minimising tax liabilities through effective planning. 

■ Developing an investment strategy for your capital and surplus income. 

■ Identifying Inheritance Tax issues that may impact your beneficiaries. 

Answering critical questions 

Ultimately, retirement cash flow modelling helps answer critical questions such as whether your savings and assets are sufficient to support your aspirations, if you can retire early, if your investment risk is appropriate and if you will have enough money to sustain yourself throughout retirement.  

Are you looking to create your retirement cash flow plan? 

Contact us now for more information. We assist you in analysing your current financial situation and creating a customised plan to ensure your retirement meets your goals. If it turns out that your cash flow plan falls short, don’t worry we have various retirement planning strategies to help get you back on track. 

Get in touch to find out more:

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The Retirement Cash Flow Planning Process

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Are you looking to create your retirement cash flow plan? 

Contact us now for more information. We assist you in analysing your current financial situation and creating a customised plan to ensure your retirement meets your goals. If it turns out that your cash flow plan falls short, don’t worry we have various retirement planning strategies to help get you back on track.

Get in touch to see how we can help:

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