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Mark Stewart, Director at Sheards Wealth Management comments on how retirees can look at ways to plan and manage their finances.
Whether you are planning to stop work in one go, or ease into retirement gradually it is important to plan and manage your finances to enable you to do this successfully.
1. First and foremost, think about what your dreams and aspirations are, of things you wish to achieve in the coming years are and think about what your retirement might look like. Having a picture of this in your mind will help you to plan accordingly.
2. List out your current liquid wealth, which might be made up of your current account, savings, ISAs, deposits and anything else you can access easily. Then think about your other assets, which may include: home, buy to let properties, your pension, your business. These are generally not easily accessible but could be sold or if it is your pension, can be accessed from 55.
3. List your current income, which will include your salary and may also include dividends or child benefits. These will at some point in your life stop and therefore no longer provide you with income, but need to be accounted for until then.
4. It is important to consider your future inflows for when you retire. These are likely to include your state pension and a private pension scheme. Make sure you gather all your pension pot details, even those pots that you may have forgotten about. The Pension Advisory Service and the Pension Tracing Service can help you with this, if you are struggling to get access to these from a previous job. Review and compare all your options with the help of a financial advisor – e.g. guaranteed income (annuity), flexi-access drawdown, taking small cash sums or taking the whole pot as cash.
5. Calculate your current cost of living, which will include basic expenses such as housing, food, taxes, child care and health care. It is important to make this as accurate as possible and take note of additional money spent each month for leisure, as these are not simple direct debits that are clear on your account statements. Consider and allocate some budget for any large purchases you may make throughout your life. Examples of these could be a holiday home, a child’s wedding or an expensive car. You may not be aware of these yet, but it is always good to forward think and allocate some budget for them!
6. Consider what your retirement cost of living might be – what will it cost you to do all of the things you want to do while you still have your wealth and health and can enjoy these precious years. Always have Inheritance tax planning in the back of your mind. Use an online calculator to check if you might be affected by it. Think about making gifts – they can reduce the size of your estate and your potential Inheritance tax bill.
You should always consider making professional financial advice when planning life changing financial situations. Speak to a wealth management company such as Sheards Wealth Management to help you make decisions on your life now and in the future.
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