When Can I Retire?
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When Can I Retire?Jon Bean from Carter Thompson Wealth Management joins this episode of the Pension and Investment podcast. He answers the most common questions clients have about retirement.
When will I be able to retire?
This is one of the most common questions we’re asked. It can be confusing: you’ve got all of these various pension pots, and it’s hard to know what that means for you.
What tends to happen is that you get a statement each year where the pension provider will forecast towards your ‘normal’ retirement date. And that is when you’ve told them you plan to retire, or standard retirement age.
But all the pension freedoms now mean that you’re not tied to the normal retirement age. You can take your benefits at any point from 55 onwards. So ‘how much you can get’ is more complex, and so is how you take your pensions – because you’re no longer obliged to buy an annuity with your pension pot.
There are different ways to take your pensions, and people need to know how they can access their money and how long it will last. And that’s really what we need to sit down and talk to people about.
I get pension statements every year – how do I understand them?
There’s no set format for how pension providers provide a statement. They all have to contain the total pension value and a forward projection, but each provider uses a different basis and different terminology.
It can even be confusing for us – we sometimes end up calling a provider to understand what the details actually mean. With your permission via a letter of authority, we’ll contact the pension provider on your behalf and get all the details.
That way we can explain what your pension is worth now, where it’s invested, the charges from the provider and what it means for your retirement.
Ideally, we will work with people throughout their working lives. That makes it a lot easier to forecast – we’ll know when you’re looking to retire, where you’ve invested, what the charges are and more. We’ll know how much you’re putting in and whether that will achieve your goals.
We had a client recently in his late 20s. He was a bricklayer and said: “I’m going to retire at 68. I’m not going to be able to lay bricks by that age, so what do I do?” We sat down with him and worked out how much he needed to put away to retire at 60. It’s refreshing to see someone planning ahead at such a young age – and useful. The sooner you start, the easier it is to formulate a plan to achieve your goals.
I’d like to take some money out of my pension, but I don’t know how to do it.
This is something we hear all the time. People come to us with five or six pensions collected throughout their working lives. The older plans often don’t allow all of the freedoms that you would want.
When the pension freedoms came in they allowed you to take money out of your pension however you want. Usually a quarter of your pot is available tax free with the remainder taxable as income. This is mainly for defined contribution pot pensions rather than final salary pensions.
When the rules changed, nobody made the scheme providers offer all of the options. So what we often see is where someone wants to take out a quarter and leave the rest until they’re retired – but their pension won’t allow it.
We write off to the providers to get all the information and make plans to achieve the client’s goals.
My friends are retiring early – can I do the same?
What it comes down to is how much you have in your pension pot and how much you will want in retirement. Some people will want £3,000 a month in retirement while others will only need £1,000, and whether you can retire early depends on how long the pot is going to last and what other sources of income you’ve got.
One of the things that we do is get a state pension forecast to see how much you can expect to receive from the Department of Work and Pensions.
Many people fill any gaps with their personal pensions. Retiring early depends on how much you need against how much you want – and these are often two different things. You might only need so much a month, but want to make allowances for holidays, new cars and other spending. We build models to show what this looks like for you.
If it’s not looking like you can retire at the same time as your friends, we’ll try and make that happen as quickly as possible. It might mean working longer, spending less, downsizing or accessing your pensions in a different way. We’ll work on it together to get you the outcome you want.
Do I have enough to retire?
There are as many answers to that question as there are people. It entirely depends upon how much you’ve got coming in, how much you’ve got going out and the lifestyle that you want to achieve in retirement.
That’s why it’s so valuable to sit down, to go through things and to build a plan for you. Then you have the confidence to go into retirement knowing that it’s going to work.
Have I left it too late to have a good retirement?
The sooner you start saving and planning for retirement the better, but we often work with people who are in their 50s and early 60s who are looking at retirement in the next few years.
Whatever your age, our job is to work with you, pull things together and make a strong plan. We’ll find out what you can do, what you can’t do and help you navigate the way to where you want to be.
Just give us a call and come into the office. We’ll have a cup of coffee and talk about your situation, perhaps look at your pension statements together. We’ll make sure that you go home knowing more about your pension than when you came in.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.