Read here what GSB Wealth Partner Craig Ritchie had to say about the 8 steps to a financially secure retirement.
According to a survey by YouGov, many Brits are underprepared for retirement, with half feeling uncertain about achieving financial freedom once they stop working. A third of respondents shared a common fear of being unable to maintain their current lifestyle in retirement.
Whether you are just starting out, midway through your career, or nearing retirement age, effective planning is key. Retirement isn’t just about age—it’s about securing a financial future and creating the lifestyle you want.
In this article, we will discuss:
1. Understand your current financial position
The first step in creating a strong retirement plan is understanding your current financial situation—your assets, liabilities, income, and expenses. This step provides you with a clear understanding of where you stand today and helps set realistic retirement goals, highlighting any gaps that need attention.
Start by listing all your financial assets: savings, investments, property, and pensions. At the same time, be sure to note any debts or liabilities that you need to address before you retire.
A comprehensive view of your financial position also includes understanding your cash flow. Are you living within your means? Are you saving enough? With this assessment, financial advisers can help determine how much you need to save and invest to maintain your ideal lifestyle in retirement.
2. Set clear retirement goals
Retirement means different things to different people. For some, it’s a chance to travel the world; for others, it’s an opportunity to pursue hobbies, spend time with family, or volunteer for meaningful causes. Setting clear retirement goals helps you understand how much money you’ll need to support your vision of retirement.
When setting your goals, consider the following:
- Desired retirement age: At what age do you plan to retire? The age at which you retire will have a significant impact on how much you need to save.
- Lifestyle expectations: What kind of lifestyle do you envision? Will you downsize your home, or do you plan to maintain your current living standards?
- Care needs: As you age, care may become necessary—factoring in potential care costs is crucial for your retirement planning.
- Legacy planning: Inheritance needs to be planned for early to mitigate potential Inheritance Tax (IHT) liabilities. By using tax-efficient structures such as trusts or life assurance policies, you can help ensure that your assets are passed on efficiently.
3. Maximise pension contributions
One of the most effective ways to save for retirement is through a pension. In many countries, pensions offer tax advantages that make them a powerful tool for building retirement savings. Take full advantage of employer pension schemes, especially if an employer matches contributions. This is essentially “free money” that can significantly boost a retirement fund.
Self-employed investors, or those whose employers don’t offer a pension scheme, should consider setting up a private pension. Regular contributions, even if they start small, can grow substantially over time, thanks to compound interest.
4. Diversify assets and income sources
Relying on a single pension for income might not be enough to ensure a comfortable retirement. It’s important to consider all your entitlements, track down any lost pensions, and explore ways to increase your income.
For example, some individuals choose to invest in additional property to generate rental income. By diversifying your assets and income sources, you can create more financial stability in retirement and reduce the risk of relying too heavily on any one source of income. This approach can help you maintain your desired lifestyle throughout retirement.
5. Plan for poor health
Healthcare can be one of the most significant expenses in retirement, and it’s crucial to plan for it early. The cost of care can place a burden not only on you but also on your spouse and even your wider family. Consider purchasing health insurance or long-term care insurance to help cover unexpected medical expenses and ease the financial strain.
In addition, maintaining a healthy lifestyle can help reduce healthcare costs over time. It’s also worth exploring government-operated healthcare options, such as the NHS, or additional benefits and services that may be available to retirees. Since healthcare systems vary from country to country, it’s essential to understand the options available to you during retirement.
6. Create a withdrawal strategy
Once you retire, you’ll need a strategy to draw down your wealth in a way that ensures your savings last throughout retirement while minimising taxes and controlling costs. Here are a few strategies to consider:
- The 4% rule: This rule of thumb suggests withdrawing 4% of your retirement savings annually. However, this approach has been criticised, and some experts believe this percentage may no longer be suitable for everyone.
- Bucket strategy: This involves dividing your retirement savings into different “buckets” based on when the money will be needed—for example, short-term, medium-term, and long-term needs.
Many retirees prefer to ‘frontload’ their retirement, enjoying life while they have both health and wealth. A competent financial adviser can help you design a withdrawal strategy that aligns with your goals and minimises your tax burden, allowing you to make the most of your retirement.
7. Regularly review and adjust your plan
Life is unpredictable, and a retirement plan should be flexible enough to adapt to changes in circumstances. Clients should regularly review the plan to ensure they are on track to meet their goals.
If clients experience significant life events, such as a job change, health issue, or market downturn, adjust the plan accordingly.
8. Seek professional advice
Retirement planning can be complex, and seeking professional advice can provide peace of mind to all current or future retirees. A financial adviser can help navigate the various aspects of retirement planning, from investment strategies to tax planning. They can also provide personalised advice based on a client’s unique situation.
Conclusion
By following these steps, you can create a roadmap to a secure and fulfilling retirement. Remember, the sooner you start planning, the better prepared you will be to enjoy the next chapter of your life.
If you’re seeking expert guidance on managing your wealth, consider contacting a qualified financial adviser at GSB Wealth. Our team is dedicated to helping you navigate your financial journey confidently and professionally. Contact us today to learn more about how we can assist you in achieving your financial goals.
Get in touch
Contact GSB today if you would like to discuss any of these matters with our in-house team.
Disclaimer
The views and opinions expressed should not be construed as investment or financial advice. The information contained is for educational purposes only.