Pensions expert shares seven things to consider before retiring during cost of living crisis this year
The early weeks of the new year present the perfect opportunity for making positive changes for the months ahead, whether that’s getting healthier, improving your finances, or finding a better balance between home and work. The ongoing cost of living crisis is making it more challenging than ever for every household and for those considering retirement this year, it can be quite daunting.
“If not, it’s important to have a clear idea of how much more you need to save, and whether delaying retirement is an option.” Work out your financial plan for retirement Your expenses are likely to change in retirement, so work out what you think you will need to meet your day-to-day living expenses and discretionary expenditure . Your current outgoings are a good place to start when working this out, but make sure you take rising prices on food and energy etc. into account.
Also, keep in mind that when you retire, you are likely to be paying less income tax, no National Insurance , mortgages and loans may be paid off, you will have no more pension contributions, and any children are likely to be financially independent. With these reductions in costs, the income you need in retirement is likely to be significantly less than you require during your working life.
Don’t pay unnecessary tax Usually, only the first 25% of a defined contribution pension is tax free ; the remaining 75% is taxed as earned income. Unfortunately, in recent years many people have found themselves paying more tax than they need to. Regulated financial advice can be a solution to this and may actually cost the same, if not less than buying retirement products, such as annuities, through online brokers. It can also be seen as an investment as an Adviser will look at all of your assets, work out the most tax efficient way for you to fund your retirement and then put a bespoke plan in place for you, which will support you throughout retirement.
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