Guide to wealth management for retirement planning

When should I retire?

Perhaps the question should be, “when can I achieve financial freedom?”

The tradition of working for the same company most of your life, then taking your pension at age 65 no longer exists. The definition of what retirement looks like is changing.

When you think of retirement, what does it mean to you? Travel, new car, moving house or even country? Maybe you will continue to work, but part-time. Working during retirement isn’t a reflection of not saving enough. On the contrary, this could be an opportunity to work at a more leisurely pace doing something that feeds your passions. Advances in health care mean that people are living longer and are likely to have a much larger time horizon post-working life.

How much do I need to retire?

When considering how to plan your retirement income, it is vital to understand your income needs now, and how they will change in retirement. The first step is to consider your current situation and determine if you are on track.

With the use of sophisticated tools, we can help you model what your retirement looks like and show you how making some small changes can impact your ability to retire earlier with a better lifestyle. Watching your retirement age decrease as you increase your savings can be quite powerful.

Is my pension enough?

The introduction of workplace auto-enrolment pension schemes and employer matches are commonplace and have helped people save more for retirement, but this is likely insufficient for many. In the aftermath of Covid and with the rising costs of living that we are all currently experiencing, increasing savings now may not be an option as the excess income might not be available.

So, reviewing your existing savings, pensions and investments is important to ensure that they are best placed to help you achieve your goals. The good news is that, for many, time is on your side when planning for retirement. Investing smartly now can have a compound effect on long-term returns and is a sensible way to manage retirement wealth.

With a pension, your funds are locked away until at least age 55 (rising to 57 in 2028), so you will be less tempted to touch these investments before retirement.

Albert Einstein called compounding the eighth wonder of the world. Regularly investing and leaving any returns to build upon themselves over the long term can greatly impact your ability to achieve the retirement you want.

Investing for retirement

Investing should be for the long term. This is because even though investments tend to rise in value over time, they can go down too. If you are investing for retirement and plan to work for another 20 years or more, then perhaps you can afford to take a higher-risk approach.

Conversely, if your retirement is right around the corner, then now is the time to review your investments and look at some less risky investments. Many investors are concerned about the recent market volatility that we have seen, but history tells us, “It is the time in the market, rather than timing the markets”, which is important.

This means that while returns are not guaranteed, rather than trying to time short-term ups and downs, you are far more likely to be successful by investing your money and being patient over time.

Tax efficiency

Pensions are a tax-efficient wrapper to save for your retirement, but there are other options that could help you build a more flexible income stream in retirement and pay less tax. For example, an individual Savings Account (ISA) allows you to save £20,000 per annum and benefit from tax-free growth. Additionally, any income that you take will also be tax-free, and they are less restrictive than a pension, as you can access the funds at any age.

With so many options out there, it can be easy to get this wrong.

Seeking professional advice early on can save you thousands in the long run and ultimately provide you with the lifestyle you want come retirement.

Speak to us about your retirement planning.