How to Prepare Financially for Retirement

How to Prepare Financially for Retirement

If you think retirement is on the horizon, it’s a good idea to start getting your finances in order. Leaving things too late can mean there’s not enough time to adjust your plan and achieve the lifestyle you want. A little financial preparation can mean the difference between a later life that works for you, and a later life that restricts your options.

Hansford Bell are financial life planners. We work with clients in a holistic way to determine their wishes for their whole life, not just their financial one. Fully regulated and chartered, we’re committed to helping our clients take control of their finances and engineer the retirement they want.

In this article, we explain some great steps you can take ahead of retirement to feel a bit more financially prepared.

What Should I Do to Prepare for Retirement?

Determine Ideal Retirement Lifestyle

If you don’t already know, it’s a good idea to start by envisioning what sort of things you’d like to be doing. Will you want to take lots of holidays? Or will you be more content pottering around the garden at home? Deciding on your dream retirement lifestyle will allow you to predict what your spending habits might be during your later years. Once you know how much you’ll need to spend in order to live the way you want, you have a financial goal to work towards.

It’s important to be aspirational but also to have realistic expectations. As well as this, you should try to allow wiggle room in case of unforeseen costs like healthcare in the event of an illness. Figure out your essential costs such as bills and groceries, then your desired non-essential costs, and add the two together. Defining the size of the retirement fund you need is vital in order to make sure you don’t outlast your savings.

Read next: What is the Difference Between Financial Planning & Financial Advice?

Decide How Best to Use Your Provisions

There are various options when it comes to your retirement provisions. Do you want a lump sum or a fund that stays invested from which you can take an income? From pension drawdown to annuities, there are lots of different ways to manage your retirement income.

How does Pension Drawdown Work? Pension Drawdown Explained >

Forecast Retirement Cash Flow

Forecast your retirement income in line with your ideal lifestyle and work out whether they are going to align. If not, you might need to make some adjustments. Make sure to consider all potential sources of income, not just pensions. Part-time work, returns from investments, rental income, and money from selling property are all going to contribute to your retirement finances.

A financial life planner can help you with this, using cutting edge software to create an accurate picture of your cash flow in later life. This step ensures there are no nasty surprises down the line, and helps you engineer the lifestyle you want. By doing this early, you’ll have time to make some changes or consider other finance options like equity release.

Cash Flow Planning with Hansford Bell >

Deal with Debts

In the years before you retire, it’s a good idea to deal with outstanding debts because retirement may pose a significant cut to your income. If you can, paying off your mortgage is a great idea too. You also might want to slightly curtail your current spending habits in line with your retirement budget so that the transition into the next stage of your life does not come as a shock.

Trace Old Pensions

Most people work more than one job in their lives, and as a result have more than one pension pot. If you’re not sure what pensions you have, you can use the government’s Pension Tracing Tool* to locate them. Once you’ve done this, you should consider combining them into one fund. However, before you do, double check you’re not going to lose valuable guarantees or benefits and won’t be faced with any hefty exit fees.

*Note – when you click this link you are leaving our regulated website for another for whose content we are not responsible.

Plan When and How to Retire

These days, more and more people are retiring gradually, or having a ‘semi-retirement’ before the real deal. Think about what would suit you better. Do you want to slowly reduce your hours or do you want a specific point to work towards? Knowing this means you have more of an idea of the amount of time your provisions need to last for, and what your window of time is to make changes.

Read next: What is a Retirement Plan Advisor?

Invest in Line with Goals

As soon as you know the age you want to retire, you can create an investment strategy to grow your funds. It’s important to have an approximate age in mind before you do this because it will determine how risky your investments can be. For example, someone with decades until retirement is probably better off choosing riskier investments like stocks. That’s because these often outperform other options, but can be volatile. On the other hand, if retirement is on the horizon, you should focus on lower risk funds and the preservation of capital.

Don’t just invest in line with your goals; invest in line with your ethical beliefs too. Check out our ethical wealth management case study here!

Wealth Management with Hansford Bell >

Keep on Top of Estate and Tax Planning

Preparing for retirement is inevitably going to involve preparing for the end of your life too. By keeping on top of your estate and inheritance tax planning, you can ensure your loved ones don’t experience financial hardship in the event of your death, and maximise the value of the estate you can pass on. An approach chosen by some is to create a portfolio of investments generating returns that exceed living expenses in line with inflation, while preserving the capital to pass on.

In terms of inheritance tax, you might want to consider gifting assets in line with your annual allowance to reduce the size of your estate, setting up a trust, or a life insurance policy in trust. Planning for inheritance tax means the people who benefit most from your estate will be your loved ones, not the tax man!

A Beginner’s Guide to Inheritance Tax – Inheritance Tax FAQ >

Get Professional Advice

Effective retirement planning can be tricky, and it’s not something you want to get wrong! For that reason, it’s wise to work with a chartered financial planner. A financial planner will help you establish your goals and create a plan to work towards them. Choosing to get financial advice means you can retire with confidence, knowing a professional has worked everything out on your behalf. And, you won’t have to worry about monitoring investments and checking up on your portfolio; your planner will have it covered.

How to Prepare Emotionally for Retirement.

When planning for retirement, financial preparation takes priority over emotional preparation. This is generally for good reason – if you feel financially prepared, you are likely to feel confident and at ease during this important transition too. Despite this, some people struggle leaving behind the structure and purpose of working life, and miss their colleague relationships.

Retirement is an important moment in everyone’s life, and feeling a strange mix of emotions is normal. To prepare yourself, keep talking it through with people you trust and be honest about your feelings. Try to focus on the excitement of what you have coming, not what you’re leaving behind.

Working with a financial life planner means the emphasis is not just on financial wellbeing, but your emotional wellbeing too. At Hansford Bell, we know non-financial goals are just as important as financial goals – in fact, they determine them. That’s why our retirement planning services are about you as a person, not you as an investment portfolio!

Retirement Financial Planning & Advice with Hansford Bell.

Hansford Bell have helped all sorts of clients realise their retirement aspirations. Our approach is people-focused, with value, transparency, and customer satisfaction in mind.

We’ve helped clients across the UK discover a better way to handle their finances. Whether you need one-off financial advice or want to work with a planner long-term, our team can help.

Contact us today to find out more – let’s make a plan!