It’s never easy to start thinking about your retirement. You might be fitter than ever, enjoying your work and everything it brings; alternatively, you might be anxious to retire, concerned that your pension will not be enough to cover the cost of living comfortably – or that the COVID-19 pandemic has already affected your retirement savings. Either way, there is no time like the present to rip the plaster off and seriously think about your long-term plans – whether to ensure a smooth transition into later life, or assuage your fears of an uncomfortable one. Here are six simple steps to preparing for retirement.
1. Consider your Current Situation
Before making any serious decisions, it’s important to know the lay of the land with regard to your current financial situation. Assess your savings situation, find out how much is in your pension pot – and if you have multiple pensions, consolidate them into a single account for ease – and count your liquid assets. Do you have any outstanding debts, or a mortgage? It’s important to know what you have, what you’re worth and what you owe in order to make an effective plan for a comfortable life.
2. Make a Retirement Budget
Knowing what you know about your finances, it’s time to create a budget. Figure out how much you will need per month to live comfortable, accounting for any debts you might still need to pay off. Speaking of debts – is there a plan to clear them in the short term? Doing so might shore up more money in the future, from avoiding needless interest payments.
3. Prepare for the Unexpected
Your budget needs to include contingencies for unexpected occurrences. Your retirement plans are no use to you if they are immediately skewed by an emergency boiler replacement, or a new car following an accident. Your budget needs headroom to allow you to live unimpeded by the obstacles life may throw at you.
4. Cut your Expenses
One of the simplest steps on here, and an excellent tip for any point in life, let alone retirement. Reviewing your expenditure can free up a surprising amount of spending money; take a look at your utilities bills, and don’t be afraid to shop around for a better energy deal. Are you making the most of your phone contract, or are you paying for perks you don’t use?
5. Consider Future Medical Costs
Increased medical costs are unfortunately an inevitability in later life, as you are more likely to develop illnesses. Setting aside some money for prescriptions, treatments and – in the worst case – private palliative care will ease the burden on you later, when you may not have the energy to find the money you need.
6. Consult a Financial Advisor
You might be concerned about finding the money to cover all these expenses and contingencies – and you would be right to be. One particularly easy way to cover all these costs is to receive the market value of your house (after any debts or outstanding mortgages) up front, in the form of an equity release.
However, there are many smart ways you can stretch the money and savings you already have in order to cover your retirement – whether smart investment using funds or shrewd use of high-interest savings accounts. If you don’t have the time or energy to read up on these methods, a simpler solution could be to consult a financial advisor, who would tell you how to correctly invest the money you do have.