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Retirement Planning Toolkit

By Alan Smith | Small Business

Use our retirement planning toolkit to make sure that all eventualities are covered.

Retirement Planning Toolkit image insurance and reinsurance executives retirement planning toolkit imageRetirement Planning Toolkit

Discover how to create a financial plan that will maximise your retirement fund.

A new study found that the average retirement in the UK is expected to last 19 years, but that average retirement savings will be used up after a third of that time (37%) – leaving people entering a period of significantly reduced living standards.

Longest holiday of your life

There are considerable challenges faced by the so called sandwich generation who need to consider not only their own long term financial security in the years up to and beyond retirement, but also their desire to help children financially, as well as worries over ageing parents.

For these reasons it pays to prepare well for what should be the next exciting chapter in your life, and the beginning of a new journey.  However, like any journey, particularly one as complex as planning for your retirement, it’s important to be really clear about where you are starting from.

So the first step is to assess how your finances are shaping up now.

You need to add up all your savings and investments, not only pensions but also cash, ISAs, bonds and other funds that you may wish to rely on in your retirement. This can be viewed as your own personal family balance sheet and will be important to you when calculating your requirements in retirement.

Your Pensions – Calculate what you can expect to receive

You should look out all your pension benefit statements, including those from previous jobs or periods of self employment and find out how much you are likely to receive as pension income.

Also, don’t forget that most pensions can pay out a tax free cash lump sum and that may be helpful to pay off debt or fund an early retirement purchase such as a round the world trip!

If you have a pension from a previous job but have lost contact with the plan administrators, you can track it down using the Pension Service’s online form.

Don’t forget about your state pension benefits

To find out what state pension benefits you may be entitled to, you can request a forecast from The Pension Service. To do this online, go to the Directgov website.

Use a simple table or spreadsheet such as this to create a summary of your expected pension income.

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Getting a better deal

If you have suffered from less than perfect health, you may qualify for uplift to your pension income in the form of an enhanced annuity and you should always shop around and review the best buy tables to secure the highest pension income from across the market.

Of course you then need to factor in any other expected income such as rental property, savings and non-pension investments, even possible inheritances if you feel this is likely.

Next Step; what is your expected current ‘cash flow’ – (‘money in and money out’)

How much will you need to live on in the future? Work out how much you will need to live the life you want after you stop working. It’s not necessarily true that you will need less income in retirement than when you were working and the early years may be expensive as you may wish to travel, eat out more and generally enjoy life to the full now that you have more available time. This budget planner will get you started.

What about equity release?

Considering releasing capital tied up in your home to assist with your retirement plans? Equity release has become more popular but it’s a big step so do your research first to make sure it’s what you need. Make sure you read up on this equity release guide before making any decisions.

Don’t give it all away to the tax man!

You’ve worked all your life to build up your wealth, so why not spend it enjoying your retirement – particularly if you have no family to leave your assets to? And even if you do, you may not want to leave them a large amount of money, much of which could be claimed by HM Revenue & Customs in the form of inheritance tax (IHT).

If you want to manage your money to ensure that you minimise your IHT liability, some of the solutions that are available include:

  • Gifting

  • Investing in assets which attract relief from IHT

  • Trusts

Before making any gifts, remember that people are living longer these days. You can’t be sure how much money you’ll need in future, or whether you’ll have to pay for long-term care, so make some provision for this before you start gifting.

If you do have heirs and want to minimise the effects of IHT, the first thing to realise is that almost everyone can leave up to £325,000 without incurring IHT. Everything above this “nil rate band” will be taxed at a rate of 40%.

Family trusts are also useful. They allow you to set aside money for your loved ones while retaining some control over it. There are several different types of trust available and care is needed to select the right one.

Recommended reading

There are numerous books on the subject of retirement planning, some very technical and full of jargon but a few which are more accessible. One book which comes highly recommended is the New York Times bestseller, The Number by Lee Eisenberg.

In the meantime, to get you started, some very interesting ideas and research can be viewed in this recent paper on Retirement Report.

The issues involved in planning for your own retirement are serious and they are complex. Most people would benefit from seeking advice from an independent professional retirement specialist, to help guide them through the maze and ensure a comfortable, relaxing and worry-free retirement – after working all these years,  you deserve that!

Protect yourself in the future by understanding the five key retirement risks now by downloading the e-guide: The Five key risks in Retirement and how to manage them

This article was syndicated from Business 2 Community: Retirement Planning Toolkit

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