The thought of a work-free life might fill you with utter glee. After all, there will be no more early mornings or early nights, as you can sleep in late and go to bed whenever you feel like it.
However, before you start daydreaming of walking out of your workplace for the final time, you must make an informed decision to ensure you time it well and live a comfortable lifestyle.
Here are nine considerations to make before you retire.
1. A Monthly Budget
While you might believe you have a healthy nest egg to fall back on in the bank, it might not be enough to fund your lifestyle once you retire. To ensure you have enough money available to cover essential household bills and fund your hobbies, you must identify exactly how much money you will need to live a comfortable life each month.
Develop a retirement budget by reviewing your bank statement to identify the cost of your:
- Essential household bills
- Groceries
- Social activities (holidays, restaurant meals, etc.)
- Vehicle expenses
Identifying how much money you are currently spending each month could help you to estimate how much cash you will need once you retire.
2. A Plan of Action
Once you have identified exactly how much money you will need available for happy retirement life, you must create a realistic plan of action. For example, you must estimate the age you will retire and how much money you will need to set aside to make your goal a reality. Your FI number or financial independence number will tell you how much money you need to retire successfully.
You also should factor in rising mortgage fees, energy prices and food costs, so you can live the same lifestyle once you finally leave your career behind.
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Discover Different Income Sources
Different retirees can rely on different income sources throughout the years. For example, you could regularly receive money from a healthy pension plan or business investment, such as tenancy fees or stocks and shares.
You also could find ways to increase your retirement income. For example, Key can provide a no-obligation consultation to discuss how an equity release can provide you with a regular income or cash lump sum if you are currently a homeowner. Plus, you could learn more about different annuities available, which can make your pension work much harder for you to secure your financial freedom.
4. Your Savings Pot
While you might have had dreams of retiring in your fifties, you might have come to realise you need to save up much more to enjoy a financially-secure retirement. If this is the case, you must accumulate as much money as possible to boost your savings and retire as soon as possible. For example, you could switch to a savings account with a superb interest rate, or you could even take an extra job to amplify your finances.
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Pay Off All Debt
Never enter retirement life with debt hanging over you. If you do, you might spend your spare time worrying about your cash flow over enjoying the simplicity of your new lifestyle. To ensure you are debt free by the time you hang up your work shoes, you should aim to reduce the repayments as soon as possible.
For example, you could:
- Make overpayments
- Prioritise high-interest repayments and work your way down a list
- Ask a lender for a smaller interest rate
- Consolidate debts to reduce interest rate charges
Decreasing your outgoings will ensure you have more money to inject into your savings account, and you will not be crippled with worry once you complete your last day at work.
6. Review Your Private Pension Scheme
While the government can provide a state pension, it is also worthwhile investing in a private pension scheme, if you don’t already have one. It’s never too late to enter, as many employers provide their staff with a workplace pension, which both you and them will pay into each month. The sum you will receive will be determined by the pension scheme an employer provides and the amount you choose to pay.
7. Your Emotional Health
In addition to organising your finances, you also must consider how you will cope emotionally once you leave work forever. It can be a tough transition to leave the responsibility and socialness of working life, as you might need to become more used to your own company.
Before you decide to retire, consider how you will occupy yourself during your free time. For example, do you plan to embrace a much-loved hobby, mix with friends, or spend more time with your family?
Also, ask yourself if you’re mentally prepared to leave work, as you might no longer have the thrill of responsibility in the workplace. If you are unsure how you will cope and don’t feel 100% ready, now might not be the best time to retire.
8. Healthcare Requirements
Many people often consider how they will spend their retirement years, which could be heading off to their holiday home, spending more time with their grandkids, or embracing a brand-new hobby. Unfortunately, they might fail to factor in their future healthcare needs.
To ensure your finances are never forced to pay the price for your poor health, you should factor in the costs of your potential healthcare requirements, such as nursing home fees, assisted living costs, or mobility aids.
If, however, you don’t need to spend the money on the above, the extra cash will be an added bonus. You also could cover the costs of potential healthcare issues by taking out a reliable health insurance policy.
9. Working Past State Pension Age
It is important to be aware that there is no official retirement age in the UK, and you should never feel forced to retire by an employer or your co-workers. However, be aware that there are some roles that allow an employer to set compulsory retirement age, such as the construction industry or fire service. If, however, you do choose to work past the state pension age, you will currently not be required to pay national insurance each month.