Planning for Retirement – Part 2

As discussed in the first part of this article, the earlier you start planning for your retirement, the more financially secure you can be during your golden years.

But most people get too caught up in the demands and pleasures of today and almost forget that there is a tomorrow.

If you still haven’t begun, then there is no better time than now to start planning for your retirement.

We discussed the first three decades of your employed life and the options you have at hand to plan for a secure future.

Despite it having a notorious reputation as the ‘selfish years’, you can inculcate good habits in your twenties and thirties which can form the bedrock of your retirement plan in the years to come.

The forties is the time when retirement is only a stone’s throw away and planning becomes a critical necessity.

Then come the Fifties.

In your 50s

Your fifties are unarguably the most important decade when it comes to financial planning.

You can see retirement on the horizon. You may have a date or a year in mind already.

This year should be enough for you to lay out a roadmap and calculate the minimum amount of money you need, to lead the lifestyle that you dream of.

There are tools like online retirement calculators which can provide you with a ballpark figure.

While it may just be a vague picture as online calculators very rarely account for taxes correctly, it should give you an overview of the many components that make up your retirement planning.

Now, it’s time to have an in-depth look at your pension investments. While most financial experts will advise you to take out risky investments like equities and opt for secure ones like cash investments, the fact is that there is no free lunch. Every investment option has its own pros and cons.

Hence, it is ideal to build a portfolio that has a mix of investments. A percentage of your investments should focus on high returns and another half should be safe and tested methods.

Spend as less as possible. The goal should be to maximize your contribution to your pension fund. All other expenses (mandatory and luxury) should be cut down.

If you were one of the early starters and have managed to accumulate a sizeable fund already, then you can consider investing in a Self Invested Personal Pension (SIPP) as it gives you greater control over your investments.

You may also think about buying an Annuity which can make a significant difference to your income in the years to come.

Your goals in this decade should be:

  • Layout a roadmap for your retirement
  • Reassess your pension investments
  • Try and create a portfolio with a mix of investments
  • Spend less and contribute more towards your pension funds
  • Review your finances periodically

The Sixties

The sixties is the home stretch. You are almost at the finishing line.

You may plan to retire in the early or later years of the decade.

You may also be fit enough to work beyond the sixties adding to your pension pot.

With increased life expectancy, your retirement period could last up to three decades. And it is important that your retirement income should last as long as you do.

So, making the right decisions regarding your pension fund which will be the source of your income and cash in the years to come, is crucial.

So, it’s time for reassessment.

These are some of the questions you may want to ask yourself.

  • Are your debts cleared off?
  • Do you still have a mortgage?
  • Are there dependants on your payroll?
  • Have you considered where you wish to live or have major expenses (house repair or buying a car)?

You need to remember that you will be transitioning into a phase where you will have to create a fixed income every month. And it is crucial that you have your debts and expenses in order.

Speak to an Independent Financial Advisor before you make an important decision.

Read our article, ‘How to Select a Financial Advisor’ for more information.

Now, it is time to prepare for retirement as you enter your seventies and beyond. Your planning is the key, to living comfortably through your retirement years. So plan wisely.

You may also look at our Complete Pensions FAQ page for more information.