Preparing for retirement – a five-year plan

The shift into retirement presents a major lifestyle change and is certainly something worth considering well ahead of time. Recognising how close you are to retirement is the first step in helping to make the transition smoother. Typically, a five-year lead-in provides the right amount of time to formulate a plan, develop an image of what retirement might look like and determine the various steps needed to get there.

The most pertinent questions will naturally centre around money and require some honest introspection: When can I afford to retire? And how much money will I need to achieve my lifestyle goals? To answer the first question, it’s important to have a clear image in mind of how you wish your post-work life to be shaped. Depending on the answer, your desired retirement age may shift. or adjustments may need to be made to your five-year plan.

It’s when facing such questions that the benefits of professional financial advice can pay dividends, quite literally in some cases. Financial advisers are trained to probe your finances for risks and weakness and contrast the results with your lifestyle expectations. Seeking advice early in the process increases the likelihood of meeting your goals, as advisers can offer a broader range of options and strategies.

One slightly uncomfortable aspect to this process is considering your own mortality – how long do you expect to live? Estimating life expectancy, although far from an exact science, provides useful parameters for your financial plan and helps forecast your cashflow requirements. Of course, none of us have a crystal ball, but we can consider our family history and any existing health conditions to help build a clearer picture. Working through this with a professional adviser allows for more realistic budgeting and greater confidence in your ability to achieve your objectives. Life insurance is another worthwhile consideration, particularly with a view to your family’s future should the worst happen earlier than expected.

Those approaching retirement will need to closely examine their income and expenditures as part of their preparations. Again, this is where enlisting a financial adviser may bring added value. They can consolidate your existing income streams, from pensions and savings accounts through to real estate and unusual items such as royalties. An adviser can then help you paint an accurate picture of the potential ongoing expenses and assess whether they align with your lifestyle goals and overall financial position. In some cases, this exercise may prompt a re-thinking of your objectives or, at very least, your route to achieving them. But by starting this process at least five years in advance, you give yourself a much greater chance of reaching your goals and enjoying the retirement that you desire.

Above all, the main benefit of beginning your retirement planning early lies not just in the future, but in the present. As we all know, circumstances can change quickly. Unexpected events such as illness, bereavement, or job loss can drastically impact your retirement outlook. By engaging with an adviser to review your plan on a regular basis, you can take comfort in an additional layer of professional oversight to keep your goals on track.

After all, even five years can pass very quickly and preparing for any less time can make retirement seem like it came out of nowhere. So why not give yourself peace of mind by preparing today for a better tomorrow?

This article is for information purposes only. It is not intended as advice.

The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn't guaranteed and can do down as well as up. The benefits of your plan could fall below the amount(s) paid in.

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