Should I delay my retirement?
Retirement is something that many of us dream of throughout our working lives, but when the time comes, it can be difficult to decide if you’re ready, both in terms of your lifestyle and your finances. The decision is certainly not made any easier by the coronavirus (COVID-19) pandemic. To help you make up your mind, here are some of the financial factors to consider.
Your retirement budget
Before retiring, one of the most important things you can do is look honestly at your spending needs.
Add up all your current monthly outgoings, both essential (household costs, medical expenses, debt repayments, etc.) and non-essential (shopping, leisure, travel, etc.). Then, adjust these for how they might change over your retirement.
For example, you might be close to paying off your mortgage, which will dramatically reduce your expenditure in a year or two. On the other hand, you might want to spend a lot of time abroad once you retire, which will substantially increase your travel costs.
Plan for everything, and you should have a figure in mind for your required retirement income.
Your pension savings
Now that you know how much you need to live on, compare that to how much you have in pension savings.
You can easily find out how much is in your pension by logging into your online account (if you have one) or contacting your pension provider with your account number.
Many people have multiple pensions, and you might not remember the details for each of them. Dedicate some time to tracking them down, starting, if you need to, by contacting current and past employers to ask who your pension provider was.
You can then contact the provider with personal details such as your date of birth and national insurance number, to help them locate your account.
Total up the amounts you have in different pensions – plus the money you’ll receive from the State Pension – and compare that to the amount of money you’ll need to live on.
Pandemic considerations
The current coronavirus pandemic has a range of potential implications for your retirement.
Pension value
Some pension valuations have been volatile since March this year, as the pandemic shook the global stock markets. But it’s normal for pension values to fluctuate over time, and don’t forget they are a long term investment. If you are not completely confident that you have sufficient money to retire on, one option could be to delay your retirement.
Furlough
If you’ve been furloughed from work for the last six months, your pension contributions and your employer’s contributions are likely to have dropped during that period. Again, this might mean that you haven’t reached your retirement savings target, and may need wait a little longer.
Returning to work
Sometimes people retire but later change their mind or realise they don’t have enough money. If you’re expecting to be able to do so, you should be aware that employment options may be more limited in the future than you expected. It may be best to wait until you’re certain before you retire.
Redundancy
More people are likely to experience redundancy this year than in a typical year, so, if you were already considering retirement, you might see this as the right time to take that step. This will be an option for some, but the decision should also be based on your budget and whether you have sufficient pension savings.
Your other options
These days you have more options than ever before when it comes to accessing your pension savings, including taking a phased retirement.
This is when you withdraw just a small portion of your retirement savings, leaving the rest invested to continue to grow until you’re ready to retire fully. This might allow you to cut down on your hours at work. If you’re interested in phased retirement, speak to us, as taking too much money from your pension can have significant tax implications.
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This information has been prepared using all reasonable care. It is not guaranteed as to its accuracy, and it is published solely for information purposes. It is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice.
Information based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
The value of investments and income from them may go down. You may not get back the original amount invested.
Past performance is not a reliable indicator of future performance.