Strategic retirement financial planning and bridging the gap

The retirement planning strategy you should adopt will depend on how close you are to retirement. Someone in their 50s, with retirement looming on the horizon, should generally be looking to minimise risk and thinking about their current lifestyle. Someone in their 20s, with a myriad of other financial concerns, may simply decide to try to remain as debt free as possible and begin saving.

General strategies

At any stage in your working life, the following could help contribute to putting you in a better position when it comes to your retirement.

Clearing debts

Since it is likely that your income will decrease anyway, the impact of any debt carried into retirement will have a more pronounced impact.

An important first step is getting an accurate handle on how much you owe. You may have mortgage, credit card and other personal loans to factor into the equation. The interest rates on these debts are almost as important as the actual amount owed when planning on the best way reducing of them.

Freeing yourself of debts takes some of the pressure off in other areas of retirement planning.

Boosting your pension contributions

Increasing the amount you regularly pay into either your work or private pension will increase the amount available to you when you retire.

There is an annual allowance of £40,000 meaning you will be taxed if your savings for each year exceed this. You can, however, top up your allowance with any previously unused allowance from the previous 3 years.

Individuals who earn £150,000 or more will see their annual allowance reduced by £1 for every £2 above £150,000 down to a minimum of £10,000 from 6 April 2016.

Boost your state pension

If you do not have enough years of paying national insurance, it is possible to ‘buy’ additional years in order to qualify.

Your pension options

The introduction of the pension freedoms in Budget 2014 were hailed as the most seismic reforms to pensions in decades.

From April 2015, individuals were given the option of taking out their full pension pot in cash from the age of 55. This new option now sits alongside annuities and income drawdown plans as strategies for people to consider.

You can take 25% of your pension pot tax-free, with the rest being charged at your marginal rate of tax.

Contact us to talk about your pension options.