4 questions to ask yourself in the run up to retirement
Don’t wait until it’s too late. Start getting answers to your retirement questions sooner rather than later.
Last Updated: 23 October 2023
If you’re not sure when and how you’ll retire, you’re not alone.
In October 2023, we joined up with independent research company, Opinium, and asked over 1,500 people across the UK about their money habits.
We found that:
- Less than 2 in 5 of us are confident we’ll be able to afford to retire
- Less than 2 in 5 of us aren’t sure how and when we’ll finish work
- Around 1 in 3 of us don’t have a clear understanding of our retirement options
Getting answers to these questions is vital in the run up to retirement. We’ll show you how you can do this yourself, and how an adviser could help you.
This article can help you make your own, well-informed decisions about retirement, but it’s not personal advice. You should consider financial advice at retirement if you’re not comfortable making your own decisions. We’ll explain this in more detail later.
1. When can I retire?
Knowing when you might be able to finish work is key to feeling confident about your retirement. Our survey found that half didn’t expect to retire until the current state pension age or over.
Deciding when you might want to retire will help you understand how long you’ve got to reach your target. Remember though, you can’t normally access money in a pension until age 55 (57 from 2028).
Our online pension calculator can help you check how much your pension could pay at retirement. Keep in mind that it’s only a guide.
For a clearer picture, it could be worth speaking to a financial adviser.
When you pay an adviser to help with your retirement planning, they’ll do more than simply crunch the numbers. They’ll take account of your wider finances as well as your pension, so you can see what your retirement could look like. And if it’s not enough, they’ll work with you to help you achieve your goals.
2. How much will my retirement cost?
By estimating how much you’ll spend in retirement, you’ll have more clarity and confidence over when you can afford to stop working.
No one wants to just get by in retirement. So, you should think about all the things you’re excited to do when you retire. Crucially, you should also think about when you might want to do those things.
Again, if this feels like too much, you could always leave it to an expert. Once an adviser is aware of your needs and goals, they can draw up a financial timeline with you and see how much money you’ll need in retirement and when. Then they can come up with a plan to make sure your pension will last throughout your retirement.
3. How can I access my pension?
Unless you’ve got a defined benefit pension (such as a final salary scheme), there are three main ways to take your pension.
- Annuities – A tax-free cash lump sum of up to 25% and a guaranteed income (taxable) for the rest of your life.
- Drawdown – Up to 25% as a tax-free lump sum, and then keep the rest invested. Take a flexible income (taxable) as and when you need it.
- Lump sums – Withdraw your whole pension or keep some invested. Up to 25% of each withdrawal will usually be tax free and the rest taxable.
Each of these have their pros and cons, but you don’t have to settle on just one option. You can mix and match to get a balance between flexibility and security. And you can take part of your pension out at different times.
Keep in mind that tax rules change and any benefits will depend on your circumstances.
4. Where can I get help with my retirement options?
What you do with your pension is an important decision, and you might not be able to change your mind later. It could impact how and when you get paid for the rest of your life. Your retirement could last 30 years or more, so it’s a decision you’ll have to live with for a long time.
For that reason, we believe retirement is the number one time in life to get financial advice.
An adviser can help you understand your options and recommend the ones which suit your needs and objectives. Then they can come up with a bespoke retirement plan, so you get the money you need, when you need it, and in a tax-efficient way.
As a rule, if you’re not sure which retirement option is best for you, seek financial advice.
Book a call with our advisory helpdesk
To find out more about how advice could help you in the run up to retirement, book a call from our advisory helpdesk. They don’t give personalised advice themselves, but they’ll discuss the process and charges so you can decide if advice is right for you. If you’re happy to proceed, they’ll put you in touch with an adviser.