We’ve put together a guide to your retirement countdown to help you see if is it time to review your financial plans with a financial check-up. If you are aiming to retire within the next five years, it’s time to get into the mindset of considering the practicalities of fulfilling your desired lifestyle and making plans. While you should think about retirement planning as early as possible, the five years leading up to retirement are critical.
Retirement may be looming with terrifying urgency, and the reality is that you have just 60 pay packets left until you retire. This is a time when you’ll need to obtain up-to-date pension forecasts and obtain professional advice to make sure your retirement plans are on track. So if you believe you are five years or less away from retirement, now is the time to seriously review your financial plans with a financial check-up.
What are the key things to concentrate on?
The first step is to ask yourself if you are actually ready to retire. There are many factors to consider. Your financial affairs are the big factor to begin with. Your ability to afford retirement depends on your lifestyle, your family situation and home ownership. If you have dependent children, or have 15 years left on your mortgage, the time might not be quite right.
You have to ensure retirement is the right move for you. Work can be stressful, but it can be rewarding and give you a sense of achievement. People may miss the routine of working life and the day-to-day interaction with people.
Taking a different path
What you need might not be retirement, it could be change. A chance to get out from behind your desk to do something meaningful. Perhaps retirement is your ticket to achieving this – taking a different path where money is no longer the prime motivation.
If you are afraid about having time on your hands after retirement, explore options for filling it well before you take the leap.
Major change in lifestyle
Retirement means a major change in lifestyle. You need a clear mind as to what you want your life to look like and how to spend your time. Then you can work on arranging your finances to suit.
Decide on your priorities for retired life. Do you want to travel, or split your time between home and somewhere hot and exotic? Is there a particular hobby you want to immerse yourself in? What kind of leisure and social activities matter to you?
Later years in your retirement
Try not to get caught up in what happens right after you end work – also consider the later years in your retirement. Will long-term travel continue to be feasible as you get older? Will you need such a large house, or will it become a burden? And what about in the latter stages of life? Would you need to fund care?
You must also have a clear picture of what kind of life you would like to lead in retirement and what it will cost. Then you can start to dig a little deeper into what you might be able to afford. This means getting to grips with your sources of income once your earnings stop.
Request up-to-date forecasts
Your first port of call is your pension – or pensions. Contact previous pensions trustees to request up-to-date forecasts. If you’ve lost details of a pension scheme and need help, the Pension Tracing Service (0800 731 0193) may be able to assist you.
You should also find out what your likely State Pension entitlement would be – you can do this by completing a BR19 form or by visiting www.direct.gov.uk.
Consolidate existing pensions
If you have personal pensions, you need to find out where they are invested and how they have performed. Also check if there are any valuable guarantees built into the contracts. It may make sense to consolidate existing pensions, making it easier for you to keep track of everything and reduce the amount of correspondence you receive.
With investments in general, it is important to review your strategy before you take the leap into retirement. You don’t need to suddenly become an ultra-conservative investor – you still want your portfolio to grow over the next few decades. Should the investment markets make a correction, you may want to limit your downside. Don’t forget, there may be another 30 years ahead.
Don’t put off confronting the truth
If your investments don’t look on course to give you the income you’d hoped for in retirement, don’t put off confronting the truth. You may need to revise your projected living costs. Alternatively, there’s still time to change your investments, and you could also cut back on spending while you are still earning to generate more savings.
Your income can be used in other ways besides topping up your savings as you prepare for retirement. Clearing debts, including your mortgage, should be a priority before you retire. Whatever you owe on credit cards and loans, focus on paying off the debt that charges the most interest first. Debt will be the biggest burden once you do not have a regular working income.