PENSIONS – INVESTMENTS – MORTGAGES – PROTECTION
January is a great time to make a New Year’s Resolution to take control of your finances and start planning towards a fantastic retirement. The earlier in life you start your financial planning, the better your future will be. Remember – everyone’s different, with different lifestyles and expectations of what they would like to do when they retire. Therefore, your financial targets will be different from others – and they need to be realistic too. To help you make a start, we have created a handy checklist below:
1. DECIDE ON YOUR BUDGET
You’ve probably heard this so many times, but we cannot stress enough the importance of setting a realistic budget, both on a monthly and a yearly basis. This ensures you know exactly how much you need to spend now, and helps you to estimate how much you may need to spend in retirement. Why not use our Retirement Budget Calculator? This tool helps you to plan how you will fund your retirement. If you’re struggling to know where to start, then please get in touch with our team who will be able to carry out a financial review.
2. WHAT DO YOU ALREADY HAVE?
You might have a mix of savings, investments and perhaps a private or final salary pension scheme. When did you last review these? Have you considered changing your savings account to one with a higher interest rate? Are you getting a good return from your investments? Final salary (“defined benefit”) pensions are under threat, so it’s important to review your current plan as it might be worth transferring this to another scheme – never transfer a pension unless you have sought professional advice, as there are a growing number of pension scams. If you need a full pensions review, please speak to one of our team.
3. WHAT CAN YOU AFFORD TO SAVE?
To ensure your retirement plan will give you the future you choose – and not ‘Mr and Mrs Average’ – you need to start putting measures in place now. The best approach is to decide on an amount from your disposable income and start saving. Build this figure into your retirement plan by speaking to your Financial Adviser. As we all lead different lifestyles, we all have different aspirations for our retirement. Your savings will be crucial in the 10 – 15-year period before you reach retirement age.
For more information, Which? compares the difference in spend for a Comfortable retirement and a Luxurious retirement – see article. However, this is only a general guide – the most important aim is for you to save enough for YOUR retirement needs.
4. WHERE CAN YOU SAVE MONEY?
Go through your bank statements and make a list of any spending cuts. You will be surprised how quickly small things add up at the end of the month and year. For example – buying a high street coffee before work each day could cost you £2.25. Over 5 days, this comes to £11.25 and over a year (minus 20 days holiday allowance), your yearly spend on takeaway coffee comes to a whopping £540! Imagine if you continued to spend this amount over a period of 5 years? Now, the total comes to £2,700. This money could work much better for you in a savings account, such as a tax-free ISA, where you can currently save up to £20,000 within this tax year (until 5th April 2018). Tip: Why not consider making coffee at your office and bring your lunch to work? Simple measures in the short-term can lead to big savings in the long-run.
How much money will you have for your retirement? Check your latest pensions statement – this will give you a general forecast of your projected pension income at your chosen age for retirement. However, this age may have been chosen by you some time ago. As most pensions now allow some access at age 55, it’s important to know how your pension can work for you, and whether it has the flexibility to work in line with the new pension flexibility rules. The most important part of your latest pension statement is the overall value of your scheme. Next, consider rising living costs and any future overheads – i.e. after you retire, you may still have children at university who need support, or mortgage payments, especially if you own more than one property.
An article in the Daily Telegraph featured research undertaken by Old Mutual Wealth, which shows that those who used a professional financial adviser to plan for their retirement were far better off than those who attempted to plan by themselves. This is due to the complexity of financial products, and both the knowledge and time it takes to safely manage a person’s wealth – please speak to one of our Financial Advisers for more details.
5. WHAT WILL YOU GET FROM THE STATE?
Did you know there are various types of State Pension? Depending on your year of birth and the level of your National Insurance contributions, you will be allocated a certain type of pension – visit our Pensions page for more information. State Pensions are unlikely to support your lifestyle alone, which is why we advise always having a diverse financial plan – i.e. mix of pensions, savings and investments – so you can look forward to a fantastic retirement and not just an average existence. To find out the forecast for your State Pension income, please see the Government website State Pension Calculator. If you employ Northfield Wealth as your adviser, we will obtain a state pension forecast for you.
6. DO YOU HAVE ANY OTHER ASSETS YOU COULD USE FOR RETIREMENT?
Retirement planning goes hand in hand with estate planning. To get a good idea of how much you will have when you retire, you need to know the total value of all your assets – this includes any business interests, property and inheritance. That way, you can make informed decisions about how to manage your estate, whether this involves business or property sale, or better ways to manage your wealth. Once you know how much your estate is worth, you can then look at inheritance tax planning for your children and any other loved ones you wish to benefit from your legacy.
In summary, we strongly recommend seeking professional advice when it comes to retirement planning. At Northfield Wealth, our expert Financial Advisers can provide you with a full financial review including mortgages, protection, pensions, savings and investments. Uniquely, we are wholly independent, which means we will always search for the best solution for you instead of being tied to any number of providers.
If you would like advice on how you can achieve your financial resolutions and goals for retirement, please get in touch to speak to one of our friendly team.