When deciding when to retire you need to calculate how much money you require to live a comfortable retirement. You should also consider whether you are you ready to retire completely or could working part-time be an option? Remember, your retirement income will need to last for your entire life.
In recent years, working beyond retirement age has become more common with 1 million people now working past age 65.* This is, in part, down to the fact we are all living much longer lives, with latest estimates from the Office for National Statistics (ONS) putting men’s life expectancy at nearly 80 and women’s at over 82. ** So, if you were to retire at 55, and didn’t keep working, you could have about 25 years of retirement to fund.
Working out how much money you need to retire is different for everyone and comes down to individual circumstances and retirement plans. To be clear on whether you can afford to retire and when to retire, you should check your:
- Savings and investments
- Any workplace or personal pensions such as SIPPs (self-invested personal pensions)
- State Pension and Pension Credit entitlements
The Money Advice Service also offers this handy pension calculator to help you understand how much you could need in retirement.
Remember to locate any pensions you may have held with employers but have forgotten about. If you moved between jobs while working, there is a chance you may have a pension with more than one employer, which could provide a boost to your retirement income. If you think this may apply to you, the Pension Tracing Service is free and can help you trace a pension you’ve lost track of, even if you don’t have details of the provider.
If there is a shortfall in what you have saved and what you need to retire, you may decide to carry on working after you reach retirement age. In this situation, you'll no longer have to pay National Insurance. You can also delay drawing your state pension, which means it should go further when you do come to retire.
As you draw closer to your retirement age, you should also get into a routine of checking your savings and investments, so you are clear on how your finances look and are in a position to make any changes to your retirement portfolio if needed. There is a wealth of options available for investing when approaching your retirement which takes into account the need for less risk while offering potentially stronger returns.
One such option is a stocks-and-shares ISA which offers a way of continuing to save for your retirement years. Like a Cash ISA, the stocks-and-shares ISA is tax-efficient and allows you to invest up to £20,000 for the 2018/19 tax year. Be aware though that a five-year investment term is usually recommended for a stocks-and-shares ISA because of fluctuations in the stock market.
Depending on how your money is invested, you may need to review your savings more than once a year to ensure you are still on track. And remember if you are unclear about your savings or investments or how you should be preparing for your retirement years, you can speak to an independent financial adviser.