September 9, 2024
Maybe it’s a life change which you are eagerly looking forward to; an opportunity to enjoy a well-earned, comfortable lifestyle with plenty of time for activities that you enjoy?
A time for travel, for new pursuits, for family?
Moving abroad? Downsizing your family home?
A period of adjusting to relinquishing your former professional life, either suddenly or as part of a phased reduction of your working hours?
Or perhaps a handover of a business you’ve spent your working life successfully building up…
Our attitudes to retirement have shifted a great deal in the last few decades, and many people are recognising that it is just another stage in a multi-stage life.
If you’ve been paying regularly into your retirement funds, whether in the form of pension pots or other savings and investments, hopefully you are confident that, whatever your plans, you will enjoy considerable flexibility in how you access your pension savings.
Arrange a pre-retirement review with your IFA
If you are considering retiring soon, whether because you are nearing State Pension age, or planning early retirement, it is wise to discuss your plans with your IFA before making any decisions.
Your financial circumstances, like your view of retirement, are unique to you, and with flexibility in how and when you draw down income in retirement comes a multitude of different potential tax implications.
This is where the value of professional advice from your IFA comes into its own. Your IFA can help you make major decisions by clarifying your options, giving you confidence in your choices, and ensuring they are appropriate and tax-efficient.
Retirement income sources
By looking at all your potential sources of income, including your State Pension, your IFA can help you to decide on your retirement date, and to work out when and how to take income.
Many people have been conditioned to believe that their first source of income should automatically be their pension, for example. That may indeed be the most appropriate choice. However, if you have other assets, in the shape of savings, ISAs, investments, or properties, for instance, it may be more tax-efficient for you to release income in those first, particularly if you are considering how to minimise your potential IHT liabilities.
Your IFA will help you to get a clear picture of all your potential retirement income sources, and you may find that the possibility of retirement is closer than you imagined, or that staying in employment but on reduced hours is enough to bridge any gap.
Ensure sustainable retirement income
Your retirement may last for 30 to 40 years, so ensuring your income lasts throughout this period is crucial. As we’ve witnessed over the previous few years, high inflation rates have impacted on the cost of living (and borrowing) so even though there are early signs of interest rates settling, ensuring your money is working hard for you is more important than ever.
Beat inflation
Retirement doesn’t mean you cease to invest. In fact, continuing to invest some of your money during retirement offers the potential for growth, a chance to keep pace with inflation, and the opportunity to continue to benefit from tax relief and allowances.
This is where advice from an IFA is essential, continuing to ensure your money is invested wisely, that your investments align with your retirement plans, and that you are making tax-efficient decisions.
Avoid overpaying taxes in retirement
This is a surprisingly common retirement pitfall. Many people don’t realise that withdrawing more than they need from their pension savings, added to income from other sources, can push them into a higher tax bracket.
We keenly await Rachel Reeves’ first Budget speech on 30th October when many of these factors could change. Your IFA can guide you through this, helping you to plan when and how to draw your retirement income to minimise the tax burden.
Aside from a change in tax legislation, which occurs in most years, a change in your circumstances can have a significant impact and your IFA will help you plan and change course accordingly.
If retirement is on your mind, and you’d value the reassurance of a financial review with an IFA, talk to a Talis IFA.
Our clients appreciate our ‘life first, money second’ approach to financial planning. It begins with understanding how you want to live your life, followed by helping you to work out what ‘numbers’ you need to support that.
We provide unbiased, objective advice in plain English, to help set you on the path to financial freedom.
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