How do you know if you are ready to retire?

Start preparing to retire as soon as you start working!

Retirement is when – for the first time in your life – time no longer equals money. Or at least it does, but only in terms of whether or not you’ll have enough of it to fund the years you have left. Ensuring that you are comfortable and secure during those years requires a measure of care and forethought. And there is no time like the present to start giving some consideration to such matters. This week, Wealth Manager Tom Fleming talks about the options you have for retiring from work… but not from life.

Today’s world is characterised by energy price increases, inflation, war and the rising cost-of-living. In short… volatility. You spend decades putting money into pension pots and you end up becoming accustomed to a certain standard of living. By the time retirement comes into focus, the burning question in your mind is “how much can I spend annually without outliving my money?”.

Regardless of who wins the next election, the tax regime is not going to get any easier. We are up against a backdrop of lower relative spending and (significantly) higher relative tax. Put simply, we are all going to feel the squeeze in one way or another. So you should do everything you can now to get into the best possible position for retirement.

Now might be a good time to check in with us and review your current circumstances. Retirement may be the furthest thing from your mind if you are at the start of your career. And then when you are in your 40s and even 50s, there is always something else for which you could be saving other than retirement. But it is never too early (or indeed too late) to make minor alterations based on an ever-changing world and make sure that you are on track.

An obvious place to start is your state pension. Check your state pension forecast and consider “backfilling” any missing years. After all, your state pension is the bedrock of your retirement. Make sure that you are fully leveraging all the valuable allowances that you have while you are still earning – plough as much money as you can into your ISA and any other tax-advantaged wrappers, for example. It’s even worthwhile looking at your cash savings and checking that you are getting the best rate.

You will have probably accumulated a number of different pensions from various employers over the years. Working out the total value of your pot might involve tracing and contacting previous employers to identify various pension providers. Needless to say, retirement spending is not exclusively about what’s in your pension pot. You may have any number of other sources of income – such as investment portfolios or properties that you are letting out.

The younger you are, the more likely it is that your pension savings will be invested based on a high-risk strategy. This is simply so as to maximise potential returns on your investments. As you near retirement, however, it will make more sense to opt for a lower-risk, more defensive strategy. The closer you get to needing to access the money, the more the emphasis should be on preserving the wealth that you have accumulated, rather than growing it. Lower-risk strategies tend to mean a lower probability of loss. The flipside, obviously, is slower – but more predictable – growth. But if you want to do everything you can to ensure that your savings last a lifetime, de-risking your portfolio might be preferable. One of the things we do as part of our cash modelling exercise with you – and indeed continue to do over the course of our relationship with you – is determine your attitude to risk. This helps us establish the right strategy based on your risk appetite and goals.

Making such decisions can be stressful, and you should do all you can to check that your savings are enough to allow you to enjoy your golden years. Get in touch with us and make sure that your plans are on track for the retirement you deserve.