Bored now, I want to get off the treadmill please!
Time to enjoy yourself
You may have been working all your life to get to a stage when you have enough, or think you do, to get off the treadmill and enjoy yourself. Retirement can be a real leveller in focusing on the things that are important to you with the time you have left. Sounds a bit grim but, for many, work provides a structure that has dictated their lives for years and this is sometimes difficult to give up. Once the leap of freedom is taken, many find their time consumed by family, holidays, friends, hobbies and the like and wonder why they didn’t do it earlier.
Getting the financial planning right at this stage of life is vital and there are many options to consider. Also, the traditional options have been shaken up by the new ‘pensions freedoms’ released in 2015. Even more reason to take good financial planning advice to meet your needs. With the probability that the children are gone, there are a few years off until the grandchildren arrive, and the mortgage hopefully repaid, there’s all to play for.
It’s been a working lifetime coming, but what should you consider as you get off the treadmill?
Pension options
There are lots of options open to you and we know a thing or two about the options you might want to consider. Rather than re-invent the wheel, the Chapters Financial Limited website has a document called ‘Retirement Options’ and this is featured here.
If you’ve lost track of some or all of your pensions, then use the free Government Pension Tracing Service here.
Pay off debts and mortgages
Entering retirement debt free is usually worthwhile. You may not get a better chance to ensure that all is repaid, especially if your overall pension income is lower than you used to earn. If you haven’t saved specifically to pay off your mortgage, could you use some of the tax-free cash from a personal pension plan to achieve this?
You still need some ready access savings
Just because you’ve stopped work doesn’t mean that emergencies won’t happen. There’s always the odd nasty surprise – the car breaks down, the roof leaks – or, on a happier note, you want to get away from it all for a couple of weeks in the sun.
The SaidSo team recommends that you hold at least 3-6 months’ of income in deposit-type arrangements that you can get to straight away if the need arises. If you’re a higher rate tax payer in retirement, think about holding your emergency fund in your partner’s name, if they pay basic rate or no income tax.
Claiming your State Pension
The State Pension age is rising and reached 66 for both men and women by 2020, increasing to 67 between 2026 and 2028, and rising further after this in line with life expectancy. The State Pension is a valuable source of index-linked income in retirement and you should check when you can expect to start claiming it. Use the Government’s State Pension calculator here.
Make a will and look at Power of Attorney at the same time
It’s worth doing this properly, so use a solicitor – you want to make sure that your estate is divided up as you would wish following your death. If cost is a problem, you could use a Will Kit, which you can buy in most good stationery shops.
Also, solicitors’ firms sometimes take part in a ‘free wills week’ and you might want to have a look out for the next one.
At the same time, you should consider putting in place Powers of Attorney (your solicitor can do this for you as well) so that your affairs are handled in the way you’d want should it become necessary.
Gifts to the family while you’ve got some cash
If you’ve got grown-up children, they are probably mortgaged up to the hilt and contending with the costs of raising your grandchildren. Now could be a good time to make gifts to the family, both to give them a helping hand and to reduce the value of your estate for inheritance tax purposes. Every individual has an annual exempt gift allowance of £3,000 – and if you didn’t use last year’s allowance, you can carry that forward. So if the gift allowance is unused, a couple could give away £12,000 in total, which would fall outside your estate for inheritance tax purposes, possibly saving tax for the family. SaidSo can also help you identify other allowances in your circumstances.
Long term care...you need to think about it!
It’s not something that most people want to talk – or even think – about. If you don’t, though, who will be making the decisions on your behalf? Long term care of a decent standard is expensive (we’re talking tens of thousands a year). As you head towards later life, it’s worth thinking about keeping a reserve for this situation, if required.
Enjoy yourself!
You’ve worked all your life – now it’s time to enjoy your free time. Most now live to age 80-85, so hopefully a decade or two away for you. Some people are delighted to have space and time, and are happy to potter around the garden or read a book. Others miss the structure of work and fill life with new hobbies, travel and voluntary work. There’s no right or wrong way to approach retirement: the main thing is that you have the time of your life doing whatever pleases you… if you can afford it!