Why financial planning is still important beyond retirement

Financial Planning beyond retirement

As you work towards retirement, it’s common to be focused on getting your finances in order. But what about life after work? Regularly reviewing your financial plan and how it matches your ambitions is just as important once you’ve left the world of work.

If you’re settling into retirement, it may seem like there’s little need for financial planning; after all, you’re no longer earning an income. But that sentiment couldn’t be further from the truth. Here are just five reasons why financial planning should continue throughout your retirement.

  1. Taking a sustainable level of income

Since Pension Freedoms were introduced in 2015, there are more ways to access your retirement savings. If you’ve chosen not to purchase an Annuity, which provides a guaranteed income for life, you’ll need to take responsibility for withdrawing a sustainable income.

Your pension provisions will need to last for the remainder of your life. If you’ve chosen to leave your pension invested once you’re retired, the level of income you can afford to sustainably take may be dictated by investment returns. As a result, you need to remain engaged with your finances and understand how they will continue to provide you with an income.

  1. Reflect your life expectancy and health

Not so long ago, retirement lasted less than a couple of decades. But life expectancy has been creeping up and it’s not unusual for those retiring today to spend 30 or 40 years enjoying life after giving up work. It presents retirees with far more opportunities but, at the same time, also means you need to take a more active role in your finances to ensure they last a lifetime.

Another key reason to use financial planning is to reflect changes to your health. The demand for care is increasing as people continue to live longer. It could mean you may need to fund care costs later in life. Alternatively, you may find that poor health means you want to spend more while you’re still active.

Revisiting your financial plan means you can adjust your spending, assets, and income in line with your health.

  1. Aspirations change

We’ve already mentioned that many people enjoy a retirement spanning decades. So, it’s not surprising that during this time your aspirations may change significantly.

Your financial plan should put your goals at the centre. Initially, you may have decided you wanted to travel extensively and needed to take a higher, regular income to fund this. Later you may welcome grandchildren and want to support your growing family, taking out lump sums to do so. Financial planning allows you to see how different financial decisions will help you reach your goals.

  1. Consider life events

Even after ticking off the retirement milestone, there will still be big life events that may change your perspective and financial position. Hopefully, when approaching retirement, financial planning allowed you to understand how potential life events would impact you. But sometimes the unexpected can happen and, even if you’re prepared, it’s important to understand how finances have changed with accurate, up to date information available to make informed choices.

Receiving an inheritance or downsizing to release capital could mean you can now afford to turn retirement dreams into a reality. Or having lost your partner you shared assets with, you could find that the best way to take an income has changed.

Financial planning can help you take these life events into account and ensure you still have confidence in your finances to make the decisions that are right for you.

  1. Planning your legacy

Passing away isn’t something anyone wants to think about but, at some point, your thoughts have probably turned to what you want to happen to your wealth when you do.

Financial planning can help you understand the inheritance you’ll leave for loved ones and plan accordingly. If it’s a priority and you want the amount to grow, your strategy can be tailored for this. Alternatively, if you want to leave a portion of your estate to young children, a trust could provide a suitable way to safeguard their inheritance until they come of age.

Engaging in financial planning in relation to your legacy enables you to take steps to secure the inheritance and security you want to leave your loved ones.

It’s also becoming more common for retirees to gift some of their wealth while they’re alive. This can help the next generation find their feet when financial support could have a bigger impact. For instance, some grandparents are choosing to gift first home deposits to family, rather than leaving an inheritance. While this can be a huge help to beneficiaries, it can be a worry for you. You may have concerns about taking a lump sum from your retirement provisions and how this will affect your income. Financial planning can help you project the impact in the short, medium and long term.

If you’re already retired and could benefit from reviewing your financial plan, please contact us. Whether you simply want to review your current finances or need to overhaul a previous plan as aspirations have changed, we’re here to help you.