Why retirement planning does not stop when you retire

When you see the phrase “retirement planning”, you might assume that this describes the 10 or 20 years before you finish working. And while the pre-retirement phase is crucial, the benefits of retirement planning do not end on your last day of work.

In fact, one could say that retirement planning is a continuous journey that requires consistent checking in, evaluation, and attention as you progress into later life.

Keep reading to find out why continuing your retirement planning journey after you stop work could be hugely beneficial.

Your tax bill could rise when you retire

When you stop earning a salary and begin drawing from various sources of retirement income, your tax liability could change.

Instead of having just one or two forms of income, for instance from a salary and a rental property, you may now be extracting wealth from various “pockets” you have built up over the years. Your retirement income could include your pension(s), Individual Savings Accounts (ISAs), and funds from your investment portfolio, for example.

Moreover, it may be easy to lose track of how much you are drawing, and from where, which could cause you to pay more tax than you had expected. This is especially important when it comes to your pension, as certain methods of drawdown could increase your tax liability unnecessarily.

Remember that only 25% of what you take out of your pension is tax-free, no matter whether you take the funds as a lump sum or access them flexibly. So, if you took your entire pension on one day, any amount above 25% of the pot’s value would usually be taxed at your marginal rate. This means you could pay up to 45% Income Tax on a portion of your pension if you are not careful.

Once you have chosen your drawdown method and extracted the funds, it is usually too late to do anything about it.

What’s more, if you plan to draw from your investment portfolio alongside your pension, some of your income may be liable for Capital Gains Tax (CGT) too.

As such, maintaining your relationship with your financial planner throughout retirement, not just in the pre-retirement phase, could be highly constructive.

A qualified professional will advise on a drawdown method that may suit your circumstances, and can continue to oversee the tax-efficiency of your retirement income in the years to come.

It is crucial to draw a sustainable retirement income

According to the Office for National Statistics (ONS), the number of centenarians (those who live to age 100) reached its highest level ever in 2020.

With more people living to a ripe old age, your retirement could now be as long as your working life. This is a positive thing, of course, but ensuring that your retirement income can be sustained over as many years as you need it to is essential for your later-life wellbeing.

Luckily, checking in with your financial planner throughout retirement could help you to maintain a sustainable living when you retire. We can:

  • Use cashflow modelling software to project how much you can afford to take as income each year
  • Help to adjust your retirement income expectations with regards to inflation
  • Ensure your protection is sufficient for your wealth
  • Guide you through the estate planning journey when you are ready, including ringfencing funds for inheritance
  • Make changes to your financial plan when life events happen, such as the birth of a grandchild.

All of the above could help to prevent you from running out of funds later in life, and may offer significant peace of mind too.

Retirement is an emotional shift that could take you by surprise

For hard-working business owners and executives, the shift into retirement is well-earned but often more emotional than anticipated.

While you may feel relieved to finish your career, you could also feel some anxiety about not earning a salary, and instead living on the rewards of your lifelong savings and investments. On a more positive note, retirement comes with a lot of excitement too; you may have more time to pursue hobbies and spend time with your family.

Ongoing retirement planning could be the ideal salve for any worrying feelings, helping you to confront your anxieties with data and reassurance from a qualified professional.

And, a financial planner can help you to capitalise on the opportunities retirement brings, so you know you are making the most of this important chapter.

Get in touch

If you are in the pre-retirement phase, on the cusp of this change, or have already retired, ongoing financial planning could add immense value to your life.

To learn more about the benefits of long-term retirement planning, email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate cashflow planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.


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