Retirement Financial Planning

Retirement Financial Planning

So, you are thinking about your golden years and you want to sort out your retirement financial planning. But, everything is a bit overwhelming and there are just a few too many things you need to consider. 

This article will help you to get to grips with the basics of retirement financial planning and help you think about implementing a long-term plan that will give you financial security once you leave the world of work. 

Starting Early & Effective Retirement Planning:

By regularly contributing to your pension and/or investments over a longer period, you allow yourself the best chance to have a larger pool of funds to draw from once you hit retirement age. 

For example, someone who starts planning in their 20s will have a longer period of savings than someone who begins in their 40s. In the UK, you may be automatically enrolled into a pension with each new job you start, which offers some help and advice. 

Your pension is the most effective way to make sure you have a well-deserved, relaxing retirement. Putting in the work earlier in life will reduce your stress once you reach your golden years. For more advice on starting early, find out what The Openwork Partnership recommends. 

Pensions: Your Essential Tool for Retirement:

There are so many different types of pensions out there, so here is a handy rundown of the most common types. 

Workplace Pensions: Starting with the most common type of pension, a workplace pension. If you are aged between 22 and state pension age, and you earn over £10,000 a year, your employer will automatically enrol you in a pension scheme. These are either a ‘defined benefit’ or a ‘defined contribution’ scheme. 

State Pensions: As a pension provided by the government in the UK, the state pension is currently calculated at £221.20 per week, paid every 4 weeks. For someone to qualify for a state pension, you need to have been paying National Insurance Tax, receiving National Insurance Credits, or paying Voluntary National Insurance contributions for 10 years overall. Find out more about this on the UK Government website. 

Personal Pensions: You pay into this pension pot and your plan provider invests the funds. How much you receive once you retire depends on how much you paid into it, and how well the investments performed. 

SIPPs: A Self-Invested Personal Pension is very similar to a personal pension, but the main difference is that you have more flexibility to choose which investments you want to make with the funds you pay in. 

The Openwork Partnership can help you to navigate the different options available. Towards the end of your work life, you might have multiple pots that you need to consolidate, or you might want to work out a better arrangement for flexibility in withdrawals. Talk to an adviser to help work out what is the best fit for your retirement goals. 

Preparing for Retirement: Strategies and Solutions:

Having a clear idea of your lifestyle goals for when you retire will help you plan more effectively. Beyond looking at your pension pots, several other assets can help you maximise your retirement funds, such as investing in property, stocks or bonds.

You should also look at strategies to consolidate your pots to provide yourself with an ease-of-access withdrawal system. Consider your wealth in general terms and assess the savings that you can make without a pension plan.

Individual Savings Accounts (ISAs): Building Tax-Efficient Wealth

Individual Savings accounts are crucial for retirement financial planning. ISAs are a great way to give yourself tax-free access to your wealth.

Pension plans have much better benefits in terms of returns on your contributions, but ISAs have fewer restrictions when it comes to accessing your money. You can contribute to your ISA before retirement, adding in contributions at least once a year. In addition, you can withdraw up to 25% of your pension pot tax-free, meaning you can put this straight into your ISA so that it is ready to be used when and if you need it. 

Concluding thoughts:

Retirement planning can be overwhelming, but, like most long-term financial strategies, small and consistent contributions over a long period can maximise the benefits of your pension plans. 

Starting young and deepening your pension pot whilst diversifying your portfolio over time is the best way to enter your retirement with a stable and secure financial position. However, this is easier said than done and can be overwhelming to tackle on your own. With The Openwork Partnership, you will gain access to investment advice, tax-efficient withdrawal strategies, and a personalised long-term financial plan to help you retire in comfort. 

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. For specialist tax advice, please refer to an accountant or tax specialist