When it comes to retirement planning, and retiring itself, it can be tricky to know what the best option is, financially. Today’s Daily Express brings readers “Your essential guide to pensions”. The Daily Express has teamed up with insurance giant Royal London to bring you top tips to help you make your retirement savings last.
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State pension warning: Claimants lose out if they don’t work 35 years 1. Speak to a financial advisor
Managing an income drawdown portfolio can be complicated and an independent financial adviser will help you deal with the risks.
They can offer advice to ensure that you invest in the right assets and don’t take out too much or too little.
2. Is now the right time?
At 55 you have reached the age where you are allowed to take a retirement income – but you should ask yourself whether you really need to do that yet.
If you draw out money too soon, you could be in trouble later.
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Pension withdrawals: Some may be worried they could run out of money in retirement (Image: GETTY)
However, it may be the perfect time to check how your savings are doing and build up the pension pot you want.
In the meantime, do you have other income, say from an ISA, another pension or paid employment to use for your current needs?
If so, it might be better to leave your pension where it is now so you can take slightly higher withdrawals later.
3. Keep and eye on how much you are taking
It can be tempting, particularly early on in retirement, to think your pension pot will last forever and to start taking out money in large chunks for things like holidays.
But if you do this too often you risk reducing the amount of income you can take later. You may even run out of money. Work out how much money you’ll need and make a plan.
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Taking large withdrawals may also cost you more tax. Timing can be vital.
For instance, if you don’t access pension savings until the tax year after you finish work means you’ll pay less tax.
Working with a financial adviser will help you stay within lower tax limits and help to maximise your money.
5. Cost and charges
It is so important to keep an eye on what you are paying. Charges vary a lot according to which provider you use.
Pension: Many people will opt to pay into a private pension (Image: EXPRESS)
Pensions: Everything you need to know explained in Daily Express guide
You will have to pay ongoing fees for your investments to be managed and for things like set-up costs.
Over time these mount up, so it’s worth keeping an eye on them to make sure you are getting the best deal and to know what effect they’re having on your savings pot.
6. Keep and eye on investment markets
The value of investments can go down as well as up and a rocky time on the markets can reduce how much your income drawdown fund is worth.
A financial adviser can give you advice on how to minimise that and may advise you to change what you are invested in or reduce the amount of income you take until markets recover.
7. Is this still the right thing for me?
Retirement is a journey and what might be right at age 65 might not be right at 75 or 80.
You might decide the time is right to purchase an annuity which will pay you a guaranteed income for the rest of your life. It is important to keep asking yourself
throughout retirement whether you feel income drawdown is still right for you.
This flexibility is one reason many people choose income drawdown products rather than an annuity when they first access pension savings.
Make sure you take full advantage of the control drawdown gives you and ensure you use it to meet changing needs throughout your life.