A one-off session with an adviser at this point could make all the difference to the direction of your retirement. While an adviser cannot change the basic retirement maths of 'the more you’ve put in, the more you’re going to get out', they can help ensure that you're on the right track and will be able to suggest solutions where you're not. Of course, it will cost you money in the short-term, but should help grow your wealth over the longer-term.
Word of mouth is the best way to find an adviser, though make sure it’s from someone you trust and who looks like their finances are being managed properly (no wacky tax schemes or way-out investments). Failing that, try unbiased.co.uk for advisers in your area.
If you see an adviser, they will help you with this, but either way, you need to be on top of your choices at retirement. That means understanding annuities, drawdown, tax-free lump sums and all the rest. These decisions are too important for you to try and wing it.
At this point, you become more vulnerable to market movements. If markets happen to crash just before you are about to retire, it can really set you back - you don't have years to wait for markets to recover from a fall. This may mean adjusting your investment strategy a little. This won't be wholesale changes and you certainly shouldn’t do anything rash like move everything into cash, but at the margins it may include moving into lower risk stock markets or increasing bond exposure. The investment platforms will have tools to guide you.
Your pension won't always be the only source of income in retirement. You may also have ISAs, rental income or an investment portfolio that can support you. This can give you some flexibility, particularly in the early stages of retirement before the state pension kicks in. It’s currently 66 but the government likes meddling with it, so it may be later by the time you get there.
It is worth noting that it can be tax efficient to draw on a variety of income sources in retirement. It helps you make the most of the various tax allowances (income tax allowance, dividend allowance and investment allowance in particular).
This will help you plan how you are going to spend your retirement pot. Your ‘needs’ will be essentials such as utilities, food, internet. Your ‘wants’ will be travel, home improvements and leisure activities. You should ensure that your ‘needs’ are covered by a guaranteed, inflation-adjusted income. This may be the state pension, or, in many cases, an annuity. The rest could be in a drawdown portfolio, where you stay invested.
Michelle, 55, asks... I have multiple pensions with different providers - should I combine them?
Jan, 57, and Ian, 63, ask... Is it worth us investing around 10% of our cash pension pot when we're already semi-retired?
Get to grips with the options available to you since turning 55 in this quick video guide from AJ Bell Youinvest.
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