Retirement is a big life step and there can be a lot to think about. From how you’re going to save to what you’re going to fill your time with, it can be quite overwhelming to assess and prepare everything before you finally stop working.

So, help yourself to relax into this new stage of life by asking yourself these three simple but crucial questions.

1. How much will you need for your target lifestyle?

Often, when it comes to retirement planning, the sensible thing to do seems to be to work out how much you have and then see what you can do with it.

But actually, it makes far more sense to work the other way round. Instead, start by making a list of goals and deciding on what kind of lifestyle you want to live, and then let the money side come afterwards.

By planning for your retirement this way round, you can tailor your financial decisions to target these goals.

For example, if you have expensive goals such as travelling around the world or buying an expensive sports car, it could be easier to achieve this by working towards it as soon as possible.

Meanwhile, if you’re planning a more modest retirement, spending time with your family and perhaps volunteering for local causes, you’ll likely need a bit less. That means you can devise a gentler financial strategy that helps you to do exactly this.

Let your goals decide how much you need, and then look at the methods you can use to achieve them.

2. When are you going to need your money?

To have an accurate idea of how much you’re going to need, it’s also important to think about when you’ll need access to it. This is just as important as deciding goals.

Knowing when you’ll need your money matters a great deal, as it will partially determine how many years it will need to support you for. In turn, this will inform how much you save and how aggressively you invest in the meantime.

For example, imagine you wanted to retire early. According to insurance provider Aviva, the most popular age for early retirement is 60.

The “official” retirement age when you receive the State Pension is 66, set to rise to 67 by 2028. That means you’ll need to take steps to ensure you have enough money to support yourself for an “extra” six or seven years.

Aviva’s research reveals that paying off a mortgage and saving little and often are key ingredients in achieving your ideal retirement age. So, if you want to retire early, strategies like these could be effective for you.

Equally, you may want to keep working until age 70, or perhaps even longer. In that case, you’re likely to need a bit less to retire. That means you can spend more freely while also potentially not needing to take on as much risk in your pension or other investments.

Obviously, you can’t know exactly how long you’re going to be retired for. But having a rough idea can refine your planning and help you to make more informed, incisive choices with your money.

3. How are you going to fund it?

Once you have an answer to these first two questions, you can finally come to the big one: how are you going to fund your retirement?

Three common options are from a pension, through your business, or through property.

Pension

Pensions are a favoured way for UK residents to save for retirement. The combination of employer contributions in workplace schemes alongside tax relief and the potential investment returns make it possible to build a healthy pot for later life.

And, as you can’t usually access your pension until aged 55 (rising to 57 in 2028), you don’t need to worry about spending the money in it in the meantime.

Thanks to these benefits, your pension could be a key part of your retirement strategy.

Business

If you’re a business owner, it’s likely that your main reason for owning your company is to provide yourself with money to live on in retirement.

There are many ways that your business could support you. This could be:

  • Staying on in some capacity and continuing to derive an income
  • Remaining as a shareholder and receiving dividends
  • Entirely divesting yourself by selling the business to someone else.

Make sure you read our article on why you need a plan before you sell your business if that’s what you intend to do.

Property

There are many ways that bricks and mortar can provide you with funds to live on once you’ve finished working.

This could be through income derived from a buy-to-let (BTL) portfolio. Owning properties and receiving rent payments on them could be an effective way for you to fund your retirement if you can afford the upfront costs of buying properties.

Alternatively, you could consider accessing the value tied up in the home that you live in.

Whether you choose to downsize to a smaller, cheaper property, or perhaps even consider equity release, your home could be a highly effective way for you to support yourself in retirement.

Bear in mind that equity release will reduce the size of your estate and may also affect your eligibility for means-tested benefits.

Make sure you speak to us at LightSide if you’re considering equity release as an option.

Work with us

If you want to plan for your retirement with confidence, please get in touch with us at LightSide Financial Planning.

We’ll create a financial plan for you that ensures you’re able to live the kind of retirement lifestyle you want, whatever that may be.

Fancy a chat? Email info@lightsidefp.co.uk or call 0151 372 0161.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.