Baby boomers need to do a little retirement income planning before making the final decision on retiring.
Until you've done you retirement income planning and you know what income you can expect to have coming in, against what living expenses you have to pay out, you won't know whether retirement is going to be the best option.
When doing your retirement income and financial planning you need to consider all possible sources of income. These are usually made up in a number of ways:
Doing some retirement income planning now will determine your standard of living for the rest of your life. However, it is important to always seek advice from an Independent Financial Advisor.
For those who reach retirement age on or after April 6th 2016 the State Pension is changing. Dependant on your age the number of qualifying years are different. The age you can retire may differ depending on your gender.
Those who reached pension age before April 2016 needed to have paid NI contributions for 30 years. The new rules need NI contributions of 35 years.
The new rules seem to have complicated the state pension rather than simplified it. It's therefore a good idea to check out the changes to see whether you qualify at https://www.gov.uk/state-pension-age
Once you are 50 or over you can obtain a Pension Forecast and information on any other benefits you may be entitled to on retirement at this link https://www.gov.uk/check-state-pension
Your Pension Provider should produce a pension forecast annually. If you haven't had one then contact your pension provider directly and request one.
If you have a company pension and your unsure of the provider then your human resources department at work should be able to advise you.
Retirement income planning is a little easier with a final salary scheme as you will be able to obtain an accurate forecast of your expected monthly payment.
However if your pension is a money purchase scheme where you receive a lump sum pension pot to go out to the market place to buy an Annuity, your pension income is a little harder to work out.
Annuity rates vary considerably and it will depend when you buy the annuity what the going rates will be.
Because of the record low interest rates at the moment 2013 may not be the best time to purchase a standard annuity. However there are a number of different products that may be more suitable for you.
It is essential that you seek advice from an Independent Financial Advisor. Never accept the pension providers annuity rates until you have compared rates in the market place.
Annuity rates can vary considerably between the best and the worst providers. If you have any serious health problems you can usually get more favourable rates because your life expectancy will be reduced.
On the 1st March 2011 the European Court ruling preventing insurers from using gender to calculate premiums changed having consequences ranging from the cost of car insurance, to the size of people's pension income. The change was expected to penalise men more than it benefits women.
The Association of British Insurers estimated that men approaching retirement could see an 8 per cent reduction in annuity rates, while women were expected to see only a 6 per cent rise.
The change was particularly negative, as four out of five annuities are currently bought by men. The ruling came into force in December 21, 2012 giving insurers a transitional period in which to adjust their rating structure.
Your pension annuity rates may be affected by these changes.
Your retirement income plan should consider any small pensions that you may have started when in past employment. Many of us have changed employers a few times throughout our working lives. If you have lost track of a previous employer's pension scheme you can contact
The Pension Tracing Service which is a free Government site.
If after carrying out your retirement income plan you have decided to carry on working, and you have more than one pension, it may be worth thinking about consolidating them.
You can do this using a (pension transfer) to ensure your pension is invested in the best funds. This can boost your retirement income considerably if you have a few years before retiring.
You would need to check first there are no penalties for switching and that you're not giving up any valuable guarantees - for example, a guaranteed annuity of, say, 10% which could double your retirement income.
Never consider switching money from a final salary scheme as it is probably more generous than you could get elsewhere. Always seek expert advice before moving pension funds.
If your retirement income planning reveals that you should defer taking your private pension and perhaps working a little longer it could improve your retirement income.
Deferring your private pension means your money has longer to grow and if your employer's scheme accepts contributions, you can add to your pension pot.
Buying an annuity when you're older usually provides a higher income as your life expectancy is a little less.
However much depends on the annuity rates available at the time you decide to draw the pension pot. There is always the possibility that the stock markets will fall so your pension could go down rather than up.
Seeking financial advice is crucial before making these kind of decisions. You would need to check where the pension funds are invested to assess the risks involved. If it's in a personal pension you may be able to switch to lower risk funds.
If your retirement income planning reveals your pension income is going to need a boost and you own a property you could decide to release equity in the property by having a life time mortgage.
Who Qualifies for Equity Release?
If you release cash from your home, you must repay any outstanding mortgage. You can use the proceeds from your plan to do this.
Before choosing this option it is wise to seek sound financial advice.
Many of us will be considering moving to a more practical home as part of our retirement income planning. Not just to reduce our running costs but it is a more effective way of releasing capital that can be put to better use.
You should bear in mind that there are costs involved in moving to a less expensive property, so always do your sums carefully. It has to be a considerable gain to make it worth the move.
However if this is an option the capital released can be invested to increase your retirement income. It can also give you freedom from the worry of maintaining a larger home and garden.
Your retirement income planning needs to include an overhaul of your personal savings.
Firstly you need to ensure that any debts you have, either mortgage or otherwise, are paid off or substantially reduced before considering retirement.
If you delay retirement you may consider topping up your private pension with some of your savings.
With interest rates at an all time low you need to be very savvy about where to put your money. Financial Advisers always tell us to make sure we use up our full ISA allowance.
However you need to be constantly on the ball with ISA's and continually monitor their performance and interest rates payable, spreading them around several providers. Similarly with bank or building society savings accounts.
Again I can't stress enough how important it is to always seek independent financial advice before buying investment products.
I always shied away from Financial Advisors because I thought you had to have a substantial amount of money before they would be interested but that is not the case.
In fact the less you have the more you need the advice of an Independent Financial Advisor. They can advise you on the best products for the amount of risk you're prepared to take.
When working out your monthly outgoings it's easy to forget those items you purchase annually. A few examples to get the brain cells working:
To help jog your memory use this
When you've completed your retirement income planning you will know whether you can retire comfortably or whether you will need to carry on working a little longer.
For more information of financial matters check out the links below:-