Five financial planning tips to make sure your pension pot will last during retirement

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Managing your money might require a rethink in retirement, particularly as your savings may need to stretch over decades now that people are living longer.

Not only do you need to think about your day-to-day finances, but it is also important to consider how much you are likely to need in the longer term.

According to a recent survey of 1,500 people carried out on behalf of Hargreaves Lansdown in September 2021, around one-third of people said they hoped to retire either to the country (29%) or near the sea (34%), while moving overseas is a desirable aspiration for a quarter (27%) of people.

However, when it came to whether these desires are realistic, only 15 per cent said moving to the country was something they could plan for, while 17 per cent said the same for moving to the sea.

Commenting on the findings, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Many of us dream of getting away from it all in retirement, but only a lucky few will be able to afford it. Spending our golden years in the country, by the sea or even overseas is seen as highly desirable, particularly among younger people. However, only a small minority expect to be able to afford it.”

Helen continued: “As we get older, fewer of us dream of a move. It may be because we get attached to our homes, and don’t want to leave friends and family. However, for an awful lot of people, this is just the dawning realization that being able to pack up your bags and move away just isn’t financially viable.

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“While many people will have properties they can sell to help finance their dreams the process can be expensive and you may end up with less money than you thought you would. Added to this, homes in such desirable locations do not come cheap and when you look at how much cash you have from your pension and a home sale it just may not stretch far enough.”

Five financial planning tips to achieve retirement goals
Five financial planning tips to achieve retirement goals

Moving in retirement is a long-term goal that needs to be planned for.

If you don’t think it’s likely you can raise enough money from the sale of your home then the extra will need to come from your pensions and other investments and it is vital you contribute as much as possible.

Taking advantage of any extra contributions your employer can make to your pension can make a big difference over time as you will make small increases to your own contributions every time you get a pay increase or move jobs.

Five financial planning tips to achieve retirement goals

Here are some tips from Colin Dyer, client director at abrdn financial planning to help boost your retirement pot.

1.Create a plan

Retirement is a marathon, not a sprint, so make sure you have an income plan that reflects that.

While celebrating and treating yourself in your early days of retirement is well-deserved, it’s important you think ahead and create a plan as to how you’re going, to make sure your money lasts for the duration of your retirement.

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Many online calculators can help you estimate what your retirement income could look like, however, it’s worth remembering, for most people there isn’t a flat level of income needed throughout retirement, so you need to factor the ups and downs into your planning.

2.Monitor your money

Household finances have been hit by the coronavirus pandemic, inflation and rising energy bills.

You need to work out how you are going to navigate these setbacks if they happen during your retirement or as you near it.

3. Grow your savings

Money in your pension is usually still being actively invested, and it is going to have a better chance of growing if it remains invested, rather than sitting in your current account waiting to be spent.

If you have any extra savings that aren’t in your pension pot, it might be worth investing these in something like a stocks and shares ISA.

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4. Be tax efficient

Generally speaking, a quarter of people’s pension pots tend to be tax-free.

Every penny counts when managing money in retirement, and that is especially true when it comes to tax savings.

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Every pension or savings pot you have may be taxed differently, and you will want to be smart with how and when you take withdrawals from each. Be aware of how much you withdraw each year, and how the amount impacts your tax bracket.

5. Don’t be afraid to ask for help

Colin Dyer suggests if you’re not sure about the best course of action, a financial adviser might be able to help.

Free guidance is also available from the UK Government-backed service Pension Wise – you can find it on the Money Helper website here.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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