While that is of course very important, there are other things that you need to consider too in order to make sure you have a secure retirement.  

Think first about how you are going to spend your time. It’s a big change to have so much free time and so you will want to fill it with lots of activities that mean something to you. This shift in how we live does take some getting used to and for some this change can be quite challenging. It may even feel like a loss for some time. We need to approach it positively, framing it mentally like a project. 

Mike Lowis*, an associate fellow of the British Psychological Society says “Retirement is good for you, provided you retire to something, not from something.”. He believes that it is important to plan for retirement and build up interests and activities so that you don’t get a shock when you suddenly have all this spare time.  

As financial planners, we do tend to spend most of our time on the money matters as it’s such an expensive thing to fund. We’ve put together a list of our top tips for how to prepare for a good retirement. 

It’s important to think about things like, what are you spending your money on now and what will you be spending it on after retirement? You need to bear in mind that there may be things you have to spend money on now that you won’t have to when you are retired. You may no longer need to buy a season ticket for travel, you probably won’t be getting a daily coffee from the local cafe and you’ll no longer have to have a separate ‘work wardrobe’ so you might find yourself buying less clothing. 

However, you might find that there are things that you will want to purchase in retirement that you don’t currently buy. For example, with more free time, you might find yourself out in your car more and therefore using more fuel (though if you are living in Scotland, make sure you get your free bus pass when you reach 60!). Or you might decide to become more active in your local community and join some groups or societies which could have membership fees such as the U3A. 

Take all these factors into account when you write up your budget so that you can estimate what you might need and what you have coming in. The difficulty is that there are, of course, various phases and your financial needs won’t be linear in retirement. The early years may well cost a lot more as you travel world and do everything you always wanted to while you are still sprightly! 

With the budget a little tighter without a salary, you’ll probably need a decent buffer to cover any unexpected costs for that rainy day – as well as a provision for funding the big things you know of in the coming years. This might be dream trips on your bucket list or more practical costs such as home improvements.  

Now that banks are offering better rates again, it’s worth reviewing where your savings are. A move to a better account could earn you a decent amount of extra interest with not much effort. It might also mean extra income to supplement your pensions.  

This is easier said than done. But you want to be clear on all your sources of income. First, check your State Pension entitlement as this can offer a decent income for a two-pension couple. It’s based on your National Insurance record with 35 years of contributions needed for a full pension. A shortfall can be addressed by paying voluntary National Insurance payments. It’s worth checking this sooner rather than later. 

You will want to understand what other pensions could be worth for you when you want them. Your needs might not align with the scheme’s retirement ages so do check this detail. 

Just like you need to know how much your employer is paying you every month, you’ll need to know how much your pensions can pay you.You’ll need to find out if you have a defined benefit pension or a defined contribution pension as these are very different in how secure they are. 

Once you are clear on all your various pensions you can hopefully have a better idea of your overall income. Don’t forget tax though as your pensions will be taxable and a PAYE code will be applied to personal or scheme pensions. You will pay less tax with less coming in so it might not be too much. 

Make sure you keep track of all your pensions. As we move from job to job throughout our careers, we can build up a bit of a portfolio of pensions. If you think you may have lost track of one check out the Government’s tracking service here. 

Take a hard look at your finances and make sure you understand what is happening. If you are serious about retirement planning, we can help with some clever modelling. Using cash flow planning software, we can analyse your finances, and assess the lifestyle your current savings would support. Then we can help you plan for what you might need to do if there is a shortfall. 

When you retire will you still be paying off some debt (e.g. a mortgage or a car payment)? Will you have a secondary income stream like income from properties or a part time job? Together with your pensions, will you have enough money to maintain the lifestyle you want? 

If you want to make sure you’re on the right track to retire well, or you just want to start the planning process, get in touch so we can help. 

*Brian Groom, “How to avoid ‘retirement shock”, Financial Times, 24th November 2015, https://www.ft.com/content/ab259e78-7999-11e5-a95a-27d368e1ddf7