3 key questions people often ask on the way to retirement, and how a financial planner can help

As you prepare for retirement, there can be a lot to think about. From financial considerations to how you’ll spend your time, you’ll need to factor many decisions into the process of finally taking a step back from work.

At Britannic Place, we’ve helped many people navigate the complexities of retirement. As a result, we’ve also heard many of the questions that pre-retirees often ask.

So, discover three common questions you may be asking yourself on the way to retirement, and how working with a financial planner can help you to answer them.

1. “When can I retire?”

The first question many pre-retirees bump into is wondering when they’ll be able to retire.

In terms of rules you must follow, there are two significant pension ages to take into account. These are the:

• Normal minimum pension age (NMPA). This is the earliest age at which you will typically be able to start accessing your pension. In 2022/23, this is age 55, set to rise to 57 in 2028. You may be able to access funds earlier due to medical reasons, although these have to meet certain requirements.
• State Pension Age. This is the age at which you can start to claim your State Pension, assuming you have made sufficient National Insurance contributions (NICs) to receive it. In 2022/23, the State Pension Age is 66, set to rise to 67 by 2028. You can check your National Insurance (NI) record online using the government website to see whether you are in line for the full State Pension amount. You can also make voluntary NICs to top up your record if you don’t currently have sufficient years to receive the full amount.

But just because these ages place limits for when you can draw your private, personal, or workplace pensions, or claim the State Pension if you are eligible, it doesn’t actually dictate the age at which you wish to retire.

Theoretically, you could retire at any age. You could stop working at 50 if you wanted to, so long as you have money outside of your pension to live on. Equally, you could continue working beyond the State Pension Age.

Arguably, a better way to approach this question is to flip it and ask yourself, “when do I want to retire?” This can make more sense, as it means that you’ll retire on your terms when you’re ready to do so.

If you’ve always wanted to retire relatively early, it’s possible to organise your wealth to achieve this goal. Similarly, if you enjoy your work so much that you want to continue doing it well into your later years, this is possible too.

By framing the question this way round, you can plan for the retirement you really want, rather than the one you think you will have to have.

2. “How much will my retirement cost?”

The question of when you want to retire somewhat bleeds into the next common query we see: “How much will my retirement cost?”

There are many predictions made that seek to answer this question. But realistically, an estimate like this will mean nothing to you as an individual. After all, different lifestyles in retirement will cost different amounts.

For example, according to an estimate published in FTAdviser, a “comfortable retirement lifestyle” would require a pension pot of £645,000. This would give you an income of £26,700 a year net of tax, excluding any State Pension and assuming you retire at the State Pension Age (66 in 2022/23).

However, this figure doesn’t take any of your specific requirements into account. Imagine that you have life goals of going on a couple of expensive holidays every year, while also wanting to support your children and grandchildren financially. Will an income of £26,700 plus any State Pension really be enough to do these things?

So, it again might make more sense to switch this question around to answer it: “What do I want to do in retirement?”

By asking yourself this question, you can essentially price up your life goals and create a projection for what your personal lifestyle will cost. You can then use this information to work out how much you’re going to need.

Combined with choosing when you want to retire, flipping this question round could help you to make better, more informed decisions with your wealth.

3. “What is the best way to fund my retirement?”

So, now that you have a rough idea of your answers for the other two questions, this brings you to a significant one: what are the best ways to save and invest your money for the future so you can achieve your goals in retirement?

There are many different ways that you might hold your wealth ahead of retiring. You might have:

• Pensions, including a workplace, personal, or private pension, or a combination
• Investments, whether those are held in a General Investment Account (GIA) or a tax-efficient ISA
• Cash savings, which might be in fixed-term or easy access accounts.

In reality, how you choose to divide your money between these different areas should be informed by your answers to the other two questions.

For example, if you did want to retire ahead of the NMPA, holding all your money in your pension might not be the most sensible thing for you, as you may not be able to access your funds for a portion of your retirement.

Similarly, if your main goal is to provide financial security for your children and grandchildren, then your pension might be the most suitable choice for you – pensions typically fall outside of your estate for Inheritance Tax (IHT) purposes, so you could use yours as a tax-efficient tool for passing your wealth to the next generation so long as this doesn’t impact your normal standard of living.

Ultimately, the answer will come down to your personal goals and circumstances. As a result, it can be sensible to use all these elements to come to the most suitable solution for you.

Working with a financial planner can help you answer these questions, and more

All in all, with the way these questions dovetail into one another, it underlines the value of working with a financial planner to help you build a comprehensive strategy for retirement.

At Britannic Place, we can help you answer these questions, and then create a bespoke financial plan that helps you to live your desired lifestyle in retirement.

Want to find out more about what we can do for you? Get in touch. Email info@britannicplace.co.uk or call 01905 419890 to speak to an experienced adviser today.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.