Annuities Explained How Will I Manage in Retirement?



After your retirement, you will have free time in droves, but a lot less money to spend. It will become important for you to manage that money.

How To Make The Most of Your Income

You will need to work out a budget, and figure out ways to make money go further. A lower income may mean your finances are stretched more tightly. A budget will help you discover how much you have coming in and going out. After working out a budget, create a list of goals, such as making home improvements or saving for something fun and exciting. You should check your finances regularly.

Savings accounts offer varying interest rates and notice periods for withdrawals without penalty. Cash ISAs will let you receive interest without income tax. You should check the level of interest payable before opening a savings account.

You should also look into your investments, bearing in mind that the level of income may vary and values can go down as well as up. If you want to invest in something else, look at the risks involved first. Look at old savings, investments, and pension accounts that you may have forgotten about, for example if you have moved home and forgotten to update your address.

You might also consider going back to work, and before doing this, you should discover any tax implications and how it might affect benefits such as Pension Credit. If you own your own home, you might consider equity release, which can convert some of the value of your home either into a monthly income or a lump sum—but this can be risky and should be done only after consulting an independent financial adviser.

What Benefits and Financial Support Can I Claim?

Benefits may help supplement your income or pay for specific costs, such as travel. In order to boost income from your pension or help with day-to-day costs, you should look into what benefits you might be entitled to. The first £10,000 of your savings will not be considered, but the rest will, for Pension Credit, Housing Benefit, and Council Tax Benefit.

For heating and insulation improvements in both privately owned and rented homes, you might be able to get money from a grants scheme if you, or your partner/civil partner is receiving certain benefits.

If you would like to know what benefits you get for travel and leisure, and you are 60 or older, you can get discounts. Coach and train travel are just some of the areas that might be discounted, in addition to free bus travel in some areas. Additional help might be available if you need support to live in your home, or if you are a carer.

What About Tax?

The amount of tax you pay will change upon retirement. You pay tax on income if it is from your pension or from interest with your savings. You might pay less tax, however, than when you were working, depending on the amount, or might be eligible to apply for tax-free interest.

If you are on a low income, you may also qualify to claim back tax that you have paid on your interest or pension. You may have to pay inheritance tax on your estate after death as well, depending on the value.

Planning For The Future

You will want to consider making a will or reviewing your existing will. If you do not, the law will determine where your assets and money will go. You can also ensure you don’t pay too much inheritance tax.

You may also want to arrange and pay for your funeral ahead of time, using a funeral plan, and legally choose who will act on your behalf should you become unable to do so. You can appoint someone as executor of your estate, for your will, and also someone, called an “attorney,” who might be a friend, relative, or professional, to conduct your personal financial affairs and/or welfare. This is called a lasting power of attorney in England and Wales, a continuing power of attorney in Scotland, and an enduring power of attorney in Northern Ireland.

What About Insurance?

If you have life insurance you should review how much it might pay upon your death in order to protect your family and dependents. You can also use insurance policies to protect you and your partner if you become seriously ill—and it can help with private medical costs. You might also need long term care, which can be provided by the State, but for better options, you might consider long-term care insurance.

How To Handle Financial Affairs of A Deceased Partner

The executor or administrator would normally sort out finances, either according to a will or the law if there is no will. If money has been left in joint accounts, the surviving joint owner usually is entitled to that money, which would not form part of the estate of the deceased.

If more than £5,000 was held in accounts in only their name, the executor or administrator may need to apply to the Probate Registry in order to gain access to the money using a grant of representation.

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