For a start off, you have to make sure you don’t outlive your money. You just can’t afford to run out of money before you die.
You’ve got a retirement check list, right? Well probably not, it’s
hardly the most exciting thing to be doing this weekend — but the potential benefit
in doing this is hard to overstate.
To successfully retire and let’s face it, a lot can go wrong,
here are my four steps to take, as you get ready to retire. This will help
ensure you don’t outlive your money. The last thing you want to do is outlive
your money.
1. Be Sure You are Ready!
And I mean this in more than just one way.
First, make sure you are financially fit and ready. The average woman who is currently
65 years old today, will probably live until the age of 89 or there about; for
a 65-year-old man it’s around 85. Interestingly, for both men and women, that’s
about 2 years longer than back in 2000. We are all living longer. We expect this trend to continue – so you need to make
sure as far as you can that you are not underestimating how much money you will
need in retirement.
Secondly, what are your plans for what you will do with your
time? Most of us have been working for decades and really should have a great
retirement. Having a good idea what you want to do when you suddenly all that
time on your hands is important.
2. Take Time to Talk With Your Other half.
Does your partner have the same ideas and thoughts about
retirement as you?
I’m guessing that you’ve had some conversations about where
you’d like to live or places you want to visit and what you’d like to spend
your time doing. But what about everyday life? One of you may be excited to
travelling and pursuing active hobbies, whilst the other may want to read and
take on charity work.
Make sure you both know what lies ahead before it’s too late.
3. Set Up a Systematic Income Withdrawal
Plan
It’s a good idea to arrange to receive monthly income from your
investment portfolio, that is fixed and covers your known outgoings. Any
natural income payments from your investments should be re-invested back into
your portfolio. Automated and fixed income withdrawal will help you plan day to
day finances more effectively.
So, how much should your withdrawals be? That depends on how
much you need to your private pension and State Pension income. Taking more money
out of your investments than you need for spending will leave you with too much
money in your current account or deposit accounts. A good adviser can help you manage
your income withdrawal needs.
4. Decide What Will Happen With What’s
Left After You Are Gone
Making sure that you don’t run out of money is one thing and
should obviously be your number one priority. But what are you plans for what will
happen with any residual pension and remaining investments once you are no
longer here? Once again, it’s a good idea to discuss this with your partner. I
know it is not necessarily an easy conversation, but it is one that you should
have.
If you can, put a clear plan in place, to ensure that your money
goes to were you want it to, after you are gone. This almost inevitably means
making sure you have a valid Will in place. Speak to your financial adviser as
they will be able to guide on how best to structure your investments, so that
they transition smoothly to the next generation.
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It is advisable to take advice from a professional financial
adviser when making major financial planning decisions.
This article has been prepared in good faith and based on
Midlands Investment Agency’s understanding of the law and interpretation
thereof at the time of creation. The contents should not be regarded as
specific advice and we always recommend that specific advice is sort from a
qualified professional. No responsibility can be accepted by Martin Dodd or
Midlands Investment Agency Ltd., for any loss that may occur by a person acting
or refraining from acting on the basis of this article.
Martin Dodd author of the Financial Freedom Formula
