Retirement planning is more than knowing your numbers

Retirement is a major life shift. You wake up one morning and everything you’ve known for years has disappeared. Gone are your work routine, daily focus, and the friendships associated with your working life. While retirement has many plus points, it’s easy to forget how closely connected our working lives are to our identity. For many of us it may feel like a huge loss. That’s why it’s important to plan what the days, weeks and months of retirement will look like.

Those of us lucky to work for caring companies may have access to pre-retirement coaching, workshops and advice services. These can help with financial and mental preparation for the years ahead. In our experience, most people worry so much about the financial aspects of retirement, they don’t consider how they will structure and fill their days with hobbies and activities, which is just as important.

In this article, we explain the steps involved in planning for the financial and emotional aspects of retirement, with practical tips and a heart-warming real-life story.

The financial side of retirement planning

Financial planning for retirement is about understanding your money and getting a grip on cash flow, so you can enjoy life right now and after you stop working. The most common concern people have as they get older is fear of running out of money in retirement. Part of the reason for this is people aren’t clear about sources of income. Understanding the level of income you will receive in retirement can be complex, especially if you have frequently moved jobs and have several workplace pensions, in addition to a private pension pot. At HWIFM, we use planning tools and financial modelling to help optimise your wealth, simplify income streams, and remove the dreaded fear factor.

Maximise tax-free allowances

An important part of financial planning for retirement is to maximise your tax-free allowances every year. Private pension contributions benefit from tax relief on up to £60,000 per year (or 100% of earnings), and you can carry over any unused allowance for up to three years. While not every individual will hit this threshold, it is reassuring to know that everyone can make significant tax-free contributions to save for later life.

Understand when you can access your pension

Different rules and restrictions apply to different types of pension. Your financial adviser should help bring clarity as to when you are able to access each one. This can be especially complex if you are dealing with multiple and/or combined funds.

The emotional side of retirement planning

The lesser talked-about and often overlooked side of retirement planning goes much deeper than numbers. Preparing yourself and your family emotionally is as important as financial planning. This is a strength of our team and one of the qualities that sets our advisers apart. It takes much more than a qualification to be a good IFA. You have to be emotionally intelligent and have excellent financial knowledge.

We share our emotional intelligence with clients through:

• Care and compassion: taking time to understand your personal circumstances, address key concerns and answer your questions. We listen with care and empathy.
• Honest communication: we are clear and straightforward. If you need to spend more money from surplus income now, we’ll tell you!
• Attention to detail: deep analysis and regular tracking of pension funds and investments to optimise income in retirement. We use our platforms to view historical records and monitor in real time.
• Integrity: transparent, unbiased, independent financial advice to serve your best interests and help you meet your financial goals.

Would you marry for financial security?

During a routine pension review with clients Sally and John, our adviser carried out a detailed review of their pension and plans for retirement. Though they had been together for decades, they had never married. Our IFA advised them that, due to upcoming changes to Pensions and Inheritance Tax in 2027, a partner would not be able to inherit the pension without paying Inheritance Tax. They had always assumed both of them would be well looked after by each other’s pension should either of them pass away. Sadly, this wasn’t the reality.

Our IFA explained the details and scenarios, then left them to consider the revelation that marriage or a civil partnership is the only way HMRC legally identifies a relationship. The next time she visited Sally and John, they announced they had decided to get married!

This heart-warming story goes to show everyone needs to understand the legal implications of their personal circumstances and the importance of regular pension reviews.

Are you due a pension review?

Planning early is crucial to maximise your pension pot and ensure you have enough saved to fund a happy, rewarding retirement. Read more about how we can help you plan financially and emotionally, and book a meeting with one of our team.