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Retirement planning

Why retirement planning is so important

In the past, most people worked until the age of 60 or 65 and then retired with a combination of state and company or private pensions. Therefore, you were either working and receiving a salary or you were retired and being paid a pension. Nowadays, especially since the introduction of pension freedoms in 2015, retirement can be more fluid as you move from full-time work to full time retirement gradually over several years

In this sense retirement is a journey not an event because you don’t have to make big one-off decisions when you first retire. It may be better to ease into retirement step by step by making a number of smaller but equally important decisions as you get older and your financial and personal circumstances change. The new pension freedoms give you greater flexibility and more options but this means you should spend more time planning ahead for your retirement.

The retirement journey

In my guide Retirement is a journey not an event I set out four important stages of retirement:

Before retirement

As you approach retirement you should check your pension and other financial affairs are in good shape

At retirement

Time to start thinking about your options to convert pension pots into cash and income, especially pension drawdown or annuities

During retirement

This is a normally a period of consolidation where reducing risk and increasing the level of guaranteed income becomes a higher priority

Later Life

As you get older it is time to look at other important financial things like equity release, IHT, wills and power of attorney

Holistic retirement planning

For many people, the pattern of retirement has changed. It is no longer a single event but the start of a journey through the various stages of retirement. This means advisers must have the knowledge and skills to give more complex advice during the different life stages. This is called ‘holistic retirement planning’ and involves taking account of all available assets when planning the best way to meet income and other retirement objectives. These assets include:

Pensions– normally provides the backbone of retirement income but advantageous death benefits mean they can also be used to transfer wealth through the generations

Savings & investments – can provide a ‘rainy-day fund’ and be used to fund discretionary spending as well as for inheritance planning

Property – can be used alongside pensions and investments

The Retirement Journey

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