It’s never to late to start planning your retirement, even if you’re one of the over-55s that has 10 years or fewer until retirement. Putting away any money at all will put you ahead of the 2 in 10 Britons who are saving nothing for retirement each month. Meanwhile, a shocking 4 in 10 who are saving are not saving enough. To keep you from falling into the trap of facing a long retirement with a short savings record, we’ll discuss ways for over-55s to put their future first and build their pension pots.
With retirement so near, it’s time to start thinking carefully about managing the risk to your investment portfolio. If you plan to join the vast majority of Britons and purchase an annuity when you retire, you’ll need to ensure that your pension pot doesn’t take a substantial hit from now until retirement.
Reducing risk is an important investment factor to consider, because any large market crashes could mean taking a substantial hit to your pension without enough time for your investments to recover.
Risk management has traditionally meant moving away from equities and investing more heavily in bonds. However, it’s important to have an active hand in managing your retirement because traditional methods of investing may not be in your best interests. For example, while ‘lifestyling’ to reduce risk typically means moving from equities to bonds, the yields from these UK government bonds are at a historic low. Choosing to shift from equities to corporate bonds may be a better decision, but it’s important to discuss this with a trusted financial adviser.
Keep surprises at bay
While most people avoid taking a hard look at their financial statements at any cost, now is the time to ensure that you know your finances inside and out in order to avoid nasty surprises when you stop drawing an income.
Use a pension calculator to ensure that you’re on track and saving enough each month, and take advantage of the free advice from the Pensions Service by getting a forecast of your state pension.
Once you’re sure that you’re saving enough, it’s important to consider how you will cash in on these savings when it comes time to retire. There are a number of options, including keeping your pension invested while drawing from it (called pension drawdown).
However, most people choose to purchase an annuity, which turns the cash in your pension pot into guaranteed regular income. Consider whether you want your annuity income to stay the same, which will mean bigger payments at the outset, or rise with inflation, which can be a smart choice for those with longer life expectancies.
The retirement options and investment strategies are endless, so if you thought you were done with retirement planning by age 55+, you were – fortunately – mistaken!
Take a look at our Pension Calculator and see what you need to save for your retirement.
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