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Pretirement: the options facing you if you’re not ready to stop working altogether

More and more people are choosing to continue working past the State Retirement Age.

According to research from Prudential, 50% of those celebrating their 60th birthday will enter ‘pretirement’. This is the act of continuing to work on an employed, self-employed or consultancy basis beyond the age at which you are eligible to begin receiving the State Pension.

Why are people choosing pretirement’?

For some, continuing to work may not be a choice, as they simply do not have the retirement fund in place to support a comfortable retirement without a job.

However, for those who do not necessarily need the money, there are four main reasons:

  • Staying active and involved
  • Maintaining a routine and getting out of the house
  • Remaining social
  • Simply enjoying work enough to want to continue doing it

For those who do not wish to stay in employment, retirement may offer a good opportunity to start a dream business or attempt to generate extra income from a hobby.

How can you make sure that working in retirement is a choice, and not due to a lack of money?

It all comes down to financial planning. To be able to make your own decisions in retirement and not be bound by a need to generate extra cash, you need to make sure that all the pieces are in place before you reach retirement age.

The main factor affecting your ability to make decisions based purely on what you want to do, rather than what you need to do, will be your finances.

Careful financial planning will help you to ensure that you have sufficient money in your pension to provide a comfortable retirement income which will support the lifestyle you want to lead, whether that involves continuing to work, or not.

When planning how you will reach your goals, you will need to consider three things:

1. What are your aspirations?

Firstly, you need to know what you are working toward before you can begin planning how you will get there. Accounting for your living costs, the activities you have planned and the type of lifestyle you hope to lead when you reach retirement age, you will need to work out how much you need to support those aspirations for the rest of your life.

The amount you will need to cover the cost of your lifestyle will also depend on your life expectancy. Of course, using calculators will get you so far; you can plan for your money to last until the age shown on the screen. But, what if life has a surprise in store and you live for a much longer time than you are prepared for?

As financial advisers, we can help answer these, and any other questions you may have about retirement planning.

2. What will you have if you change nothing?

If you continue to make the same pension contributions you are currently making, for the rest of your working life, how much will you have when you retire? If you currently have a sound financial plan in place, the chances are that you are on track to meet your retirement needs.

However, if you have not yet thought that far ahead, you may need some guidance and help to work out exactly what your retirement finances could look like in the future. Fortunately, that’s where we can help.

3. What do you need to change to bridge the gap?

If your predicted retirement income is not quite what you had in mind, you will need to make some changes to your strategy. And, the sooner you do so, the better, as it will give you longer to work toward your goals and may even mean that you can add extra funds to your emergency savings.

If you need to make changes which will add more money to your pension, you have three options:

  • Increase your contributions and make lump sum contributions when possible
  • Use the money earned by working into retirement to support your lifestyle
  • Adjust your lifestyle expectations to match your income

The value of financial advice

Engaging with a financial adviser when planning your retirement finances will increase your confidence and knowledge, equipping you to make better financial decisions. It will also open your eyes to products and options which you may not have considered, or even been aware of, previously.

Research from Unbiased has shown that those who engage with a financial adviser prior to retirement could benefit from putting an additional £93 per week away for the future, which can translate into an extra £3,654 in retirement income per year.

For more information, or to discuss your retirement plans, please get in touch with us on 02380 633377, or click here to request a call back.