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Plan your dream retirement

Plan your dream retirement

What if you could have the retirement, that you’ve always dreamed about? Would you spend more time with your family, buy a rural retreat, pursue a business idea, or enjoy a good life in the sun?

To enjoy a “comfortable” retirement, the Pensions and Lifetime Savings Association believe you will need to have an annual income of £37,300 (£54,000 for couples) a year. However, according to the Department of Workplace Pensions, nearly 40% of us are not saving enough in our pensions to maintain our lifestyle in retirement, focusing more on our current way of life.

To make your dreams a reality, the first step is to work out how much you will need in retirement, and plan accordingly.

Here are 5 top retirement planning tips to help your retirement dreams a reality.

1. Start paying into your pension as early as you can

It’s never too early, or too late, to start planning for your retirement. By planning early, you can maximise the amount you can save into your pension, as well as employer contributions. 

Take the example of a 50-year-old business owner with no pension and an income (for pension purposes) under £150,000. If the company pays in the maximum amount of £5,000 per month on their behalf (£60,000 limit per annum) then the fund could be worth £852,407 when they retire at 60 (assuming 5% annual investment growth).

2. Don’t underestimate the cost of retirement

Think about how much money you’ll need to cover your basic living expenses; plus the luxuries such as holidays and travelling. Only you will know what standard of living you’ll be comfortable with in retirement. Cashflow forecasting can help you to visualise exactly how far your money can go.

3. Be aware of changes to your circumstances and rule changes

Pensions and their underlying investments change regularly, so it’s important to keep an eye on these. You want to make sure you are planning proactively rather than reactively to any changes that will inevitably occur. 

For example, your attitude to investment risk may change as you plan for or approach your retirement so making sure that you take the right level of investment for you is important.

If you are a high earner, you may have different contribution allowances. The rules changed again in April 2023, so you could have a higher or lower contribution allowance than in previous years depending upon your total income from all sources.

4. Consider the tax on your pension income

Building your dream retirement takes more than a healthy pension pot; making sure that you don’t pay more tax than you need to is also an important factor.  By keeping your tax to the lowest level, it keeps your pension value higher for longer, meaning you can enjoy a longer or earlier retirement,

25% of your pension pot can be drawn tax-free, and after that, any payments you receive are subject to income tax at your marginal rate; however, by using tax-free allowances such as the Personal Allowance (currently £12,570), you can withdraw up to a further £16,760 from your pension each year, tax-free.

There are other options for drawing an income from your pension and it’s important to make sure that you select the option that is right for you.  

5. Plan to take your pension cash carefully

Starting retirement doesn’t mean drawing on your pension savings straight away.  Using other savings and ISAs first, or in combination with your pension, allows you to keep your pension invested and growing, giving you more in the long run.

At Independent Women, we work with you to create a bespoke financial plan which helps you reach the retirement of your dreams. 

If you would like more information, please don’t hesitate to contact us and speak with our friendly, expert team.

Content on this page is provided for general information and is subject to change and does not constitute advice.

If you would like to know more for your own situation, please do not hesitate to contact us.
We would be delighted to discuss this with you in more detail, taking your circumstances into account.

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