5 questions to ask yourself before you retire

  • Leanne Lancaster
  • 18 May 2023
  • 10 mins reading time

Planning for retirement is much more than just paying into a pension each month. How do you know you’re saving enough to live the life you want to live in retirement? Without a clear financial plan in place, you could be risking not achieving your retirement goals. However long you have been contributing to your savings, the best time to start prioritising planning for your retirement is often ‘now’.

If you do have a retirement plan in place, then it’s a great start. But it’s important to check it regularly to make sure that it’s still on track to meet your needs. Reviewing your plans annually is recommended whilst you’re still saving for retirement.

There are many tough decisions to consider when planning for your retirement and as the realisation of retiring draws closer, here are five questions you may want to have the answers to.

How much do I need to save?

This question can be as difficult to answer as how long is a piece of string. Thankfully, the Pensions and Lifetime Savings Association (PLSA) have launched the Retirement Living Standards to help people understand what lifestyle they could enjoy when they retire.

These standards have been developed based on independent research by Loughborough University and are divided into three distinct levels. The levels provide a practical way for people to work out how much they should be saving for their future.

Source: Pensions and Lifetime Savings Association Retirement Living Standards

Assuming you qualify for the full State Pension of £10,600 per year (2023/24), you may still need between an additional £2,200 and £26,700 a year as a single retiree to hit these standard levels.

Given that the average amount saved in a pension over a lifetime is currently £57,000, according to the Office for National Statistics, many pensioners may be alarmed to discover how little income their savings will provide.

Am I on track?

It’s important to regularly review your pension pot to make sure that you’re on track to be able to live the life you want when the time comes to retire. Worryingly, research commissioned by Schroders Personal Wealth discovered that only 15% had sought advice from a financial adviser to guide them towards a comfortable retirement while 70% had no idea or were not sure how much income they would need to survive on as they got older (1).

By talking to a financial adviser regularly, you get the opportunity to discuss the complex decisions involved in planning for retirement with a qualified professional. You don’t need to navigate this milestone alone. The better you plan for your future; the more likely your retirement will meet your expectations.

What age can I retire?

The good news is that there is no longer a fixed age at which you have to retire.

As long as you and your employee are happy for you to keep working, then you can no longer be forced to retire on the grounds of age alone (with the exception of certain jobs where a compulsory retirement age can be justified e.g., police officers, pilots etc.). There is also no minimum age for retirement, although you should ensure that you’re financially secure enough to give up work before you do so.

For your state pension, since December 2018 males and females have qualified at the same age - currently 66. This will increase to 67 between 2026 and 2028.

In July 2017, the government announced its plans to increase the state pension age from 67 to 68 between 2037 and 2039 (though this is yet to be confirmed.), which is seven years earlier than previously planned. If this change goes ahead, it will affect people born between April 1970 and April 1978.

If you have a defined contribution pension, you can normally access your money at the age of 55. If you choose to do this, you can withdraw up to 25 per cent of your pension tax-free. You should be mindful though that some schemes will have a 'selected' retirement age and you may incur an early exit penalty if you access your pension before this point.

The exception to this would be if you were seriously ill. If this was the case and you needed to access your funds early, then you should contact your pension provider.

Note: The government intends to increase the minimum age at which you can access personal pensions to 57 in 2028, so that it will remain 10 years before you are eligible for the state pension.

How long will my money last?

When planning how long your pension pot will last, it’s important to be realistic. Life expectancy has increased significantly in recent decades and as such, in the UK, a man aged 65 today can expect to live, on average, another 18.5 years and a woman 20.9 years. The issue is that if you underestimate how long you will live after you retire, you run the risk of running out of money. At Schroders Personal Wealth, we often advise people to plan based on living to the age of 100.

It’s also important to take into consideration that lifestyle during retirement may change over time. You may be very active during the first 10 to 15 years of retirement. In this period, you may want to spend more money, take lots of holidays, and make the most of your years of vigorous health. Consequently, you could need more money in your sixties and seventies than in your eighties when your lifestyle might start to slow down.

Your main concern for your nineties might be to have stability and comfort. You may also want to prepare for the possibility of later life costs in nursing homes or domestic care in your own home. So, funding needs could potentially rise again.

Do I need an estate plan in place?

An estate plan sounds like something only the extremely rich would need, but the truth is, if you have money in the bank, own a home, and/or have children or other dependents, you should probably have one in place.

Estate planning is simply a case of making your intentions known for when you are no longer around to let your loved ones know. Whether your plan is straightforward or complex, the purpose of estate planning is to protect yourself and your assets so that you can pass on your wealth in the way that you wish.

Of course, no one likes to think about dying and so the first step is often the most difficult to make. Starting with writing a will is a good place to start. You make your intentions of how you would like your assets and property to be distributed after you pass away and name an executor who will oversee your estate when the time comes.

Despite there being so much to think about when planning for your retirement, it is also an exciting time. This major life event could be made less daunting with a financial plan in place to help you live the life you want when you stop working.

Source: (1) Schroders Personal Wealth: The impact of inflation research, August 2022

Important information

The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

There is no guarantee by investing money it will keep level or beat inflation, particularly when inflation is high.

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.

Any views expressed are our in-house views as at the time of publishing.

This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or part) without our prior written consent.

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