Approaching retirement is a worrying time for everyone.  Have you saved enough?  A recent report showed that only a quarter of people retiring this year feel confident that they have enough put aside – not only to enjoy, but to afford these years at all.  This needs to be tackled before taking the leap and retiring.

  • Would flexi-retirement work for you?

 In the past retirement meant stopping work altogether whereas today there are many retirees who continue to work long after their official ‘retirement’ in a part-time capacity.  Retirement is really what you make it with some people opting to set up their own businesses whilst others opt for a part-time job or flexible working.

Retirement is a very exciting time when you will have more time to explore new hobbies, have holidays and send time with friends, but the working environment has always provided social engagement ad he self-esteem that comes from being needed and doing a good job.

Doing what is right for you when retirement is looming is what is important.

2) Navigating the cost of living

 Over 25% of retirees are not sure what the impact inflation will have on their retirement income.  With the cost-of-living spiralling and the State Pension increases being below inflation relying on this income alone to fund retirement could be tricky.

With inflation currently at 9%, the value of any money sat around in cash is declining in real terms and those relying on it, risk running out of money sooner than they may think.

Retirees need to make clever decisions and seek professional support more so now than ever before, helping to ensure their money is beating inflation and working harder for them.

  • Get on top of your taxes

 Retirement has a lot of changes to the tax you have to pay.  After you have retired, you still have to pay income tax on any income over your personal allowance, which currently sits at £12,570. This applies to all your pension income, including the state pension.

Every pension or savings pot may be taxed differently, and you will need to be strategic with how and when you take withdrawals from each.  Before retiring, do your research on how much you will need to withdraw each year and how the amount impacts your tax bracket.

A quarter of your pension pot is usually tax-free, and you will pay income tax on the rest. If unsure on the best course to take to ensure you can make your retirement income as tax efficient as possible, consider speaking to a financial adviser for personalised, expert advice.

4) The power in gifting

 With retirement, it is important to make the most of your savings and make sure you are meeting your individual needs. However, it is never too early to start thinking about how you can increase the amount you eventually pass on.

Giving gifts is a way to reduce future inheritance tax. There is an annual allowance of £3,000 which lets Brits gift either a single recipient or multiple people up to this amount each year without it being taxed. Alternatively, there is no limit on the number of small gifts, valued under £250 per person, which can be given per year.

With gifts beyond these allowances, there is also a seven-year rule to keep in mind. Your gifts will still be considered as part of your estate, and therefore subject to the tax, if given within seven years of your passing. However, the gifts given seven years or more before you die will be exempt.

You can choose to gift your assets by way of charity donations. This provides more flexibility as you can do so while you are alive or after you’ve passed, and all donations are exempt entirely from IHT.

5) Care costs

 With retirement potentially lasting 30 years or more, it is vital that people are fully aware of how they are going to make their money last. People often think that they will have higher income needs at the beginning when they are fit and healthy and then over time this will reduce, but taking this assumption runs the risk of exhausting their retirement pot too soon.

Most people would prefer not to think about it, it is something that is important to prepare for financially.  Seeking help with retirement planning to map out what you will need at every step of the way can make what is perceived to be a complex and emotive process much easier to manage.