Pension Income Planning

Planning for your retirement income is one of the most important things you should have in place if you want to avoid running into any financial difficulties when you’re no longer going to work or plan to retire.

Although, it is not easy maintaining the same level of income once you retire, with the right planning and effective advice, you can always maintain a comfortable standard of living and in some cases even enjoy the same lifestyle that you do during your working years.

This short retirement income planning guide from Piccadilly Wealth Management will help you guide the way to receive a good pension income for a lifetime.

When should you start planning for your retirement?

The perfect time to start planning for retirement is as soon as you have a job and you are earning a regular income. In other words, the sooner the better.

If your company offers one, its a very good idea to become a part of your company’s pension scheme.

Contribute a portion of your monthly income and ensure you keep track of the contribution.

You should give your contributions more attention when you are close to your retirement. You can even opt for pension consolidation to significantly increase your pension income.

How do you prepare for retirement?

The secret to preparing for your retirement is saving enough money as you work to guarantee you a stable income when you retire.

Calculate how much money you will need to have a comfortable life once you retire.

Related: Maximise your pension contributions - how much is enough?

There are several retirement income calculations that you can choose to help you with this, and then you can start making your partial savings and build a suitable port for your working life.

The right place to save for your retirement is in a pension plan so that you benefit from tax relief and employer contributions.

What should you consider when planning for your retirement?

You have to think of how tax deductions will affect your retirement contributions and ensure you save a portion of your income in a tax-efficient manner.

You should also consider the tax implications of withdrawing your pension income.

In most cases, you will be allowed to withdraw the first 25% of your lump sum pension, after which the rest of the withdrawals will be charged normal rates.

Other considerations you should make include whether you should use pension drawdown or income.

You also want to consider whether you should buy a guaranteed pension income with an annuity.

Related: Steps to take when taking pension transfer advice

You should tailor your investment plan depending on your age. Your investment plan depends on your age – someone in their early 50s will have different needs compared to someone in their mid 20s.

What are some of the risks involved in retirement planning?

The following are some of the risks when planning for your retirement:

  • Longevity risk: Not being sure of how your life expectancy affects how you save your income. Men underestimate their age by six years and women by eight years on average, several studies have found.

  • Investment risk: When you put all your income in long-term investment, you stand a risk of losing some of the money when you don’t make any gains.

  • Inflation risk: Inflation could have you getting less of your money if you are on a fixed retirement income.

  • Annuity risk: Before making that decision to buy an annuity, you should contact your financial planner. There are poor annuity rates you should avoid when investing your retirement money.

What’s Next?

Contact Piccadilly Wealth Management to speak to a financial advisor and get expert help on pension income planning.

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