A Long Life Needs a Smart Retirement: Reaching the big 50 can be a financial wake-up call

Your 50s are a crunch time when saving for your retirement. If you’ve already set a retirement savings target but have been neglecting it, you probably can’t afford to delay your planning any longer – and it could well be time for a careful review.

Are you on track to retire when you want to? Do you have enough in your pension pot to retire comfortably? A comfortable lifestyle means different things to different people. If you’re in your 50s, it’s important to make retirement planning a priority if you haven’t done so already. At this age, retirement is no longer a distant concept, and time is short if your plans aren’t on track.

WILL YOU HAVE ENOUGH MONEY FOR RETIREMENT?

One of the advantages you have in your 50s is that you are no longer relying on very long-term projections to determine if you have enough for retirement. The decision to retire will also depend on how financially independent you are, how healthy you are and even perhaps whether you have hobbies or goals you want to pursue.

Now is the time to think about your retirement income goals and the steps that you need to take to achieve your goals. One of the most important things to do in your 50s is to work out how much money you’ll need to retire comfortably.

There are many variables to consider, including the age that you plan to retire, your life expectancy, your income requirements in retirement, your expected investment returns, inflation, tax rates and whether you qualify for the State Pension.

Given the number of variables, this part of the retirement planning process is not always straightforward.

DO YOU KNOW THE ANSWER TO THESE QUESTIONS?

Q: When do I want to retire?
Q: How much income do I want in retirement?
Q: Do I have previous personal or company pension plans that need reviewing?
Q: Can I work part-time and take some of my pension?
Q: How much will my State Pension be?
Q: Where is my pension money invested, and is it growing?
Q: Can I retire early?

PROVIDING YOU WITH MORE CLARITY

Nowadays, it’s common for many people to have accumulated an array of different pension policies throughout their working life. By the time you have been working for a decade or two, you may have accumulated multiple pension plans on your career journey.

If appropriate, it may be worth considering a pension consolidation at this stage of the retirement planning process. This could provide you with more clarity in relation to your overall pension savings and make it easier to plan for your retirement. You may also benefit from lower costs.

But not all pension types can or should be transferred. It’s important that you know and compare the features and benefits of the different pension agreements you are thinking of transferring. It is a complex decision to work out whether you would be better or worse off combining your pensions.

ALTERNATIVE WAY TO GROW YOUR PENSION SAVINGS

In your 50s, one alternative way to grow your pension savings is to save money regularly into an Open Architecture Personal Pension. These are government-approved personal pension plans that enables you have full access to all UK regulated funds and all listed instruments on the stock exchanges. The plans also shelters capital gains and income on investments from HM Revenue & Customs (HMRC).

Personal Pension Plan (PPP) contributions receive tax relief. Basic-rate taxpayers benefit from 20% tax relief, meaning an £800 contribution is topped up to £1,000 by the Government, while higher-rate taxpayers and additional-rate taxpayers can claim an extra 20% and 25% tax relief respectively through their tax returns. Please note that the tax relief claimed from your tax return won’t be automatically added to your PPP.

There is a limit to how much tax relief you are entitled to. It is currently applicable to contributions up to a maximum of £40,000 per annum (if you have relevant earnings to match this) or £3,600 gross if you do not have any earnings . Another special feature is the three-year carry-forward rule. This rule allows you to carry the last three tax years’ of unused pension contribution annual allowances into the current tax year.

This is a useful feature for people who were unable to use up their annual allowances in the past but have the ability to do so for the current tax year. You must use this year’s allowance before using the carry forward rule.

There is also the option to invest within a Stocks & Shares ISA. Like the PPP, this type of account allows you to hold a wide range of investments, and all capital gains and income are sheltered from HMRC. Each individual can contribute £20,000 per year into a Stocks & Shares ISA.

GOOD TIME TO REVIEW YOUR ASSET ALLOCATION

Your 50s is also a good time to review your asset allocation. You’ll want to ensure that your asset allocation matches your risk profile now that you are getting closer to retirement. As you move closer to retirement, it may be sensible to regularly review your risk profile to ensure it matches your attitude to investment risk and also capacity for loss.

With retirement just around the corner, you may wish to consider your level of exposure to stock markets, although based on more flexible pensions freedoms legislation, it is possible pension investments can remain invested for 30 years plus at retirement.

If retirement beckons in the short to medium term, you may look to build a sustainable portfolio with perhaps an emphasis on greater income and reduced volatility and risk. However, moving away from an exposure to growth assets entirely or too early can result in missed opportunities, so it’s essential you obtain professional financial advice before taking any action.

Unless your situation is unusual, some retention of these growth assets is going to be required during a retirement that could last more than 30 years plus. It’s important to balance the need for liquidity and an exposure to growth assets.

REVIEW YOUR RETIREMENT PLAN ON A REGULAR BASIS

Finally, in your 50s, it’s important to review your retirement plan on a regular basis. As with any other aspect of your personal finances, it’s essential to conduct regular reviews of your pension arrangements to ensure that they fit best with your current situation.

A regular review will ensure healthy progression towards retirement by checking that you are firmly on track with your retirement goals. This is the time to adjust your plan to fit any evolving needs and desires for your post-retirement years. We all change as people over time, and our pension pot needs to reflect our current situation.

Retirement planning is a continual process, and the more often you review your progress, the more prepared you’ll be for retirement and the more in control you’ll feel. As a minimum, aim to review your retirement plan at least once annually to ensure that you’re on track to achieving your retirement goals.

WE’RE WITH YOU EVERY STEP OF THE WAY

Are you already saving into your pension or just getting started? Whatever stage you’re at, we’ll give you a clear idea of how much you’ll need to afford the lifestyle you want after you retire. To find out more or to discuss your requirements, please contact us.

Who are Vizion Wealth?

Our approach to financial planning is simple, our clients are our number one priority and we ensure all our advice, strategies and services are tailored to the specific individual to best meet their longer term financial goals and aspirations. We understand that everyone is unique. We understand that wealth means different things to different people and each client will require a different strategy to build wealth, use and enjoy it during their lifetimes and to protect it for family and loved ones in the future.

All of us at Vizion Wealth are committed to our client’s financial success and would like to have an opportunity to review your individual wealth goals. To find out more, get in touch with us – we very much look forward to hearing from you.

DISCLAIMER:

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. PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.
THE VALUE OF INVESTMENTS AND INCOME
FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE

“The information contained in this article is intended solely for information purposes only and does not constitute advice.  While every attempt has been made to ensure that the information contained on this article has been obtained from reliable sources, Vizion Wealth is not responsible for any errors or omissions. In no event will Vizion Wealth be liable to the reader or anyone else for any decision made or action taken in reliance on the information provided in this article”.

Posted by Andrew Flowers

Andrew is the managing partner of Vizion Wealth and has been involved in the offshore and onshore financial services industry for over 18 years. Andrew was the driving force behind Vizion Wealth after years of experience in a number of advisory roles within high profile wealth management, private banking and independent financial advisory firms in the UK.

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