To start with, you have to make sure you don’t outlive your money. You can’t afford to run out of money before you die.
Have you got a retirement check list? Probably not. It’s not the most exciting thing you should be doing at the weekend — but the potential benefit in doing this is hard to overstate.
To retire successfully, and let’s face it, a lot can go wrong, here is my 4 step guide, as you get near to retiring. This will help ensure you don’t outlive your money. The last thing you want to do is outlive your money.
First, make sure you are financially fit and ready. The average woman who is currently 65 years old today, will probably live until the age of 89 or there about; for a 65-year-old man it’s around 85. Interestingly, for both men and women, that’s about 2 years longer than back in 2000. We are all living longer. We expect this trend to continue – so you need to make sure as far as you can that you are not underestimating how much money you will need in retirement.
Next, what plans do you have for what you will do with your free time? Most of us have been working for many years and should really have an enjoyable retirement. Having a good plan for what you want to do when you find all of the extra time on your hands is important.
Take time to talk with your partner
Have you spoken with your partner and do they have the same thoughts and ideas about retirement as you do?
It’s likely that you may have had conversations about where you want to live or places you’d like to visit and what you’d like to spend your time doing. But what about everyday life? One of you may be excited to travelling and pursuing active hobbies, whilst the other may want to read and take on charity work.
Make sure you both know what lies ahead before it’s too late.
Set up a Systematic Income withdrawal plan
It’s a good idea to arrange to receive monthly income from your investment portfolio, that is fixed and covers your known outgoings. Any natural income payments from your investments should be re-invested back into your portfolio. Automated and fixed income withdrawal will help you plan day to day finances more effectively.
So, how much should your withdrawals be? This depends greatly on how much you need to take out of your private pension and your State Pension income. I you take more money out from your investments than you actually need to spend, will leave you with too much money in your current account or deposit accounts. A good financial adviser will help you to manage your income withdrawal needs.
Choose what will happen with your money when you are gone
Ensuring that you don’t run out of cash is your number one priority for your retirement, certainly from a financial perspective. But what are you plans for what will happen with any residual pension and remaining investments once you are no longer here? Once again, it’s a good idea to discuss this with your partner. I know it is not necessarily an easy conversation, but it is one that you should have.
If you can, put a clear plan in place, to ensure that your money goes to where you want it to, after you have gone. This certainly means making sure you have a valid Will in place. Speak to your financial adviser, as they can guide on how best to structure your investments, so that they transition smoothly to the next generation.