As the typical lifespan in the UK continues to increase, people are finding it increasingly difficult to save for their retirement. The state pension is also far from ideal, offering just £141 per week on average to help you fund your retirement. This means that many people struggle financially during their retirement, so what can you do to make the most out of your retirement?
#1. Building Pension Funds
The first thing to consider is your existing pension funds, and precisely how long they can sustain you for in retirement.
To do this, we’d recommend combining any private or workplace schemes into a single pot, before adding this to your prospective state pension. Also, factor in any investments or assets that you hold separate from your pension, to create a detailed overview of your short and long-term finances.
If you notice a significant shortfall in your finances, you can also consider additional ways of generating income for your retirement. For example, if you’re aged over 55 you may be able to unlock the residual value on your home and access tax-free funds through an equity release mortgage. This larger lump sum could allow you to make big home improvements or go travelling.
The key here is to operate smartly and accurately calculate your pension income, before taking actionable steps to make the best of the situation.
#2. Understanding Your Spending Habits
To arrive at even more informed conclusions, you may also want to calculate your likely expenses during retirement.
At this stage, you should also take a look at where your money is stored and how it can be accessed. For example, money held in a typical ISA isn’t taxed on withdrawal, so this capital can be spent freely without incurring any additional costs or levies.
If you have one eye on your beneficiaries and their future inheritance, you may also want to consider gifting certain assets ahead of time. So long as you gift a property or lump sum of cash to a beneficiary at least seven years before your death, this will be removed from your estate and not subjected to subsequent inheritance tax (where a levy of 40% is applied to all estates worth £325,000 or more).
#3. How to Spend Your Retirement Money
Finally, we come to the fun part of the article, as we discuss how you can deploy and spend your retirement funds.
Ultimately, this is a deeply personal consideration that’s unique to you, as they are a myriad of things that you can purchase or spend your cash on once you’ve entered your retirement. For example, some of you may want to travel and see new parts of the world, which will require a large pool of money from which to draw. Conversely, you may content yourself with smaller and flexible city breaks or making home improvements so that you can spend your retirement in style.
No matter what you choose to do with your retirement, make sure you enjoy it!
