Are you looking forward to retirement? You’ve worked hard for most of your life and now it’s finally time to sit back and relax. That means no more early mornings (unless you want to), no more meetings and a lot more time to yourself.
You might want to take the opportunity to travel or relocate from the city to the country. Whatever your plan for life after work, there are a few important things to think about first — especially when it comes to your finances.
We’re retiring later in life than we used to, and the lifestyle you’ll be able to enjoy and the date you can start enjoying it will come down to how things are looking money-wise. Here are four action points to check off your list.
WORK OUT YOUR RETIREMENT INCOME
Before you start planning how you’ll spend your time, it’s a good idea to work out how much money you’ll have to live off. Many people do this at least one or two years before retiring to work out a realistic end date if retiring early.
You’re likely to have built up a couple of different types of pensions. Get hold of an updated statement for your state and defined benefit pensions and add up any savings and investments that you could also use after clocking off for the final time.
CONSIDER MOVING YOUR MONEY TO LOW-RISK INVESTMENTS
If you have a personal, stakeholder or workplace pension, you’ll probably have some money invested in funds. While they can pay off, they do carry some danger so it’s wise to move your money to lower-risk investments as you move closer to retiring.
Some funds do this for you automatically, but not all of them. It’s beneficial to do this a long way in advance, so consider speaking to a financial adviser if you’re not sure what’s best for you.
PAY OFF YOUR DEBTS
As your income is likely to go down, it’s good to try and retire as debt-free as possible, as any ongoing repayments will take up a chunk of your available funds.
If you do have existing debts on credit cards, loans or mortgages, note down their outstanding value and interest rates and prioritise how you will tackle them. Paying off the debt with the highest interest rate first means you pay out less in the long-term.
ADJUST YOUR BUDGET FOR RETIRED LIFE
Careful budgeting is essential throughout life, and your spending patterns are likely to change in retirement as your lifestyle does. You’ll no longer have to spend on commuting and work clothes, and you might even downsize your home or sell one of your cars.
However, you’re also likely to start spending more on things like utilities, leisure and healthcare. If you don’t have a budget already, draw one up to track your spending now and try to map out how it will change after you leave the workplace.