If you plan to retire in 2024, you are likely already making plans about how to spend your time. Perhaps you want to travel the world and take up new hobbies? Or maybe you are simply looking forward to more quality time with your family?
Whatever your goals in retirement, there are some important financial housekeeping jobs that you may need to complete so that you can achieve your dream lifestyle. Planning ahead can also ensure a smooth transition to this exciting new phase of life.
Read on to learn about five crucial steps to take if you plan to retire in 2024.
1. Trace any lost pension pots
As you prepare for retirement, it may be useful to consider your assets and how you will use them to generate an income when you are no longer working.
You may draw a significant portion of your income from pensions, so it is important that you know where all your savings are. Yet, many people have old pension pots that they have lost track of over the years.
According to research reported by PensionsAge, there was an estimated £2.7 billion in lost pension pots in October 2023.
You could lose pension pots if you moved house and forgot to update your address, or you may not realise that an old employer enrolled you in a pension scheme to begin with.
Fortunately, you can use the government Pension Tracing Service to find out which pension schemes your previous employers may have used.
Tracking down any lost pensions is a crucial step as it could give you a valuable boost to your savings in the lead up to retirement.
2. Make the most of your Annual Allowance
Paying into a pension is an efficient way to build your retirement savings because you may receive employer contributions on top of your own, and you also benefit from tax relief.
Every time you make a contribution, you typically automatically receive 20% tax relief at source. This effectively means that it only “costs” you £80 to make a £100 contribution. You might also be able to claim more tax relief through self-assessment if you are a higher- or additional-rate taxpayer.
In the 2023/24 tax year, you can contribute up to £60,000 to your pension while still receiving this tax relief. This is known as your “Annual Allowance”.
However, you may have a lower Annual Allowance if you are a higher earner or have flexibly accessed your pension.
As such, you may want to use as much of your Annual Allowance as possible before you start drawing from your pension, so you can maximise the tax relief that you receive ahead of your retirement.
3. Create a retirement budget
Now that you have found any lost pensions and topped up your retirement savings as much as possible, it’s time to consider how you will fund your lifestyle.
It’s important that you create a detailed retirement budget so you can draw sustainably from your savings. Without one, you risk spending your savings too quickly and facing financial difficulties later in life. Conversely, if you are too cautious with your spending, you may make unnecessary sacrifices to your retirement lifestyle.
Start by calculating your regular outgoings including utility bills, food, and entertainment. Then, consider larger costs such as holidays or a new car, for example.
You also need to consider other expenses that you may have to pay in later life. These include:
- Supporting family members
- Purchasing a new home
- Care costs.
Adding up all these costs will ideally give you an idea of what level of income you need to generate each year to fund your lifestyle.
You can then decide on the most efficient way to draw that income from your retirement savings. It is important to consider the potential tax implications here, so you can retain more of your wealth.
For example, you might decide to draw from savings in an ISA before your pension, as they are not subject to Income Tax. Only taking what you need to fund your lifestyle could also help you reduce your taxable income.
4. Update your estate plan
Your retirement is a good opportunity to review your estate plan and check that it is still suitable for you and your family. Often, your budget and lifestyle change when you retire, and your priorities may shift too.
As such, you might want to update your estate plan to reflect this. You may need to check your:
- Will
- Expression of wishes form
- Lasting Power of Attorney (LPA).
If you do make changes to your estate plan, it’s important to communicate this to your family. You may also want to create copies of relevant documents and give them to the executor of your will.
Having clear instructions in place ahead of time may make things much easier for your family when you pass away.
5. Meet with your financial planner
A meeting with your financial planner can help you ensure that everything is in place in the lead up to your retirement.
We can assess your pensions and other assets with you and use cashflow planning to help you create your budget. We can also use cashflow forecasts to model potential future scenarios so you can account for large expenses such as care costs.
Additionally, we understand that this is a big transition, and you may be apprehensive about retiring. We can discuss any concerns you might have and give you the reassurance and support you need to retire with confidence.
Get in touch
If you plan to retire in 2024, get in touch and we can help you prepare.
Please contact us at hello@ardentuk.com or call 01904 655 330. As an award-winning financial advice company that was a 2022 VouchedFor Top Rated firm, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning, will writing or cashflow planning.
