When looking at flexible retirement, it is important to consider all of your options.
Is this really realistic? We take a look at our pros and cons, and the things you might need to consider when it comes to making your retirement income last.
Flexible retirement gives you the opportunity to take things a little easier, without giving up the structure of employment.
You can continue earning an income, and any gap in your earnings can be enhanced by drawing on one or more of your pensions.
You may not have enough pension savings to make flexible retirement practical.
Drawing on your pension, especially your State Pension, the moment it becomes available could cause problems in the future. You may not be able to build enough savings from the income you’ve earned by working part-time and late in life to give yourself a good standard of living throughout retirement.
You could end up having to work for more years than you intended, or live on an inadequate income if you reduce your hours at your normal retirement age, let alone earlier.
Making your retirement income last
So, with all of these things to consider, how do you make sure you have enough to live on throughout your retirement?
Make pension contributions as soon as you can
Many commonly used pieces of advice tend to lose their emphasis over time. The best way to ensure you have enough income in your later years is to start contributing to a private or occupational pension as soon as possible. This means you can make plenty of contributions, and it also gives your money time to grow. Plus, if you’re a member of an occupational pension scheme, your employer may be prepared to match any extra money you pay in over and above the minimum contributions required.
Pay into your pot for as long as possible
Even if you’re in your fifties, sixties or older, there are still ways you can improve your financial prospects once you retire. You may be able to continue contributing to your private and occupational pensions. There’s less time for your money to benefit from stock market growth, but your contributions will benefit from tax relief at the highest rate of tax you pay. For more information about how much you can invest visit the Pensions Advisory Service.
Keep a record of how much you withdraw
Keep an eye on exactly how much you have taken from your pension pot and the consequences of doing so. The government has limited the tax-free amount you can invest in your pensions to £4,000 a year if you’ve already accessed your pension pot (this applies to any contributions made from 6 April 2017). Anyone who has drawn on the taxed part of their private or occupational pension can’t make a contribution of more than £4,000 a year. However, you can still take your tax-free lump of cash without triggering the £4,000 contribution limit.
Defer your State Pension
Your pension can increase significantly by deferring the benefits – by 5.8% in fact, % for every year that you delay receiving your benefits.
Get professional advice if you need it
Pensions are complex and their rules change frequently. If you’ve got any concerns or questions about investing in a pension, it’s a good idea to seek help from a professional financial adviser.