By the time you reach your 60s, you should already have covered the basics of financial planning: ISAs, Pensions, Wills and even Trust planning. So, what are the next steps as you move towards the end of your working life and into retirement?
For many people, actioning their financial plan can be a mentally difficult task. Moving from an environment of accumulating wealth to spending it can be daunting.
A well-built financial plan can provide a clear roadmap to retirement, although it is important to fine tune your plans as the day draws near. You need to review your spending needs, estimate ongoing tax liabilities, and consolidate accounts to get the clearest possible picture of your retirement income.
It is also a good time to review your investment portfolio to make sure it provides an element of protection as you transition into retirement. This is often called ‘life styling’ and will depend on how you plan to take your pension income. Taking time to go over your plan now will enable you to retire with peace of mind about your finances.
Many people look forward to having more free time in retirement, but far fewer have a plan for exactly what they will do with it. The average retiree watches around 40 hours of television per week, maybe even resorting to daytime TV! However, we think that ensuring an enjoyable retirement requires a bit more than adding a Disney+ subscription to the one you already have with Netflix.
Whether you are interested in continuing work and phasing your retirement or devoting more time and money to causes you care about, make sure that this aspect of life is not just an afterthought.
It is also time to look for some lost money. We are not talking about looking behind the sofa for pound coins either. Latest estimates by the Association of British Insurers (ABI) estimates have calculated that over £19 billion worth of pensions have been forgotten by UK pensioners, comprising 1.6 million accounts with an average size of £13,000.
Moving jobs, home or even just misplacing documentation are all ways of losing track of your hard-earned money, which often leave your funds in expensive and outdated investments. This can result in missing out on thousands of pounds worth of growth over time.
People who suspect they may have old pensions from previous jobs can track them down by contacting the Pension Tracing Service. It is worth doing for all the companies you have worked for as, on average, this is only 3.2 different companies and is surprisingly often worth the effort.
It is also worth looking into your State Pension Entitlement. If there are any gaps in your National Insurance contributions, these can be filled through Class 3 voluntary National Insurance Contributions and are often exceptionally good value for money.
Once pensions have been tracked down it is often (though not always) worth consolidating them into a single pot. There are exceptions to this, for example where a pension has special benefits that would be lost on transfer (such as a guaranteed annuity rate). However, having all your pensions in one pot enables you to manage things much more effectively and to understand the overall performance more clearly – but this is something that you should probably be delegating to a financial adviser to sort out.
The first mistake of many retirees is overspending in the first few years of retirement. The second is underestimating their own longevity. Twenty, or even 30 years, of retirement is increasingly common, and this trend is only going to going to increase.
If you are cutting it close, a few more years of working income might allow you to continue investing prudently for growth, reducing the risk of outliving your assets. This is where cashflow forecasting becomes useful as the software illustrates how different variables can affect your ongoing retirement income as well as, most importantly, what levels of withdrawals are sustainable. Once again, your financial adviser is going to have the best tools for this.
Financial planning in your 60s is not the final chapter of a long effort. In many senses, it is just a change in the environment to which you must carefully adapt. It requires careful planning, and this is where the services of an expert Wealth Strategist can be invaluable.
If you would like to discuss your options in more detail, then please contact us and one of our Wealth Strategists will be pleased to explain things in more detail with you.