3 powerful reasons to speak to a financial planner before you retire

If you’re nearing retirement, you might be feeling excited about all the things you’re planning to do with your free time.

But have you prepared your finances for retirement? Putting a financial plan in place could ensure that you have enough savings and income to enjoy the lifestyle you want. 

However, calculating how much money you need for a retirement that could potentially last 30 years or more isn’t always straightforward. 

And yet, according to research by Standard Life, two-thirds of people plan their retirement without seeking professional advice, and 1 in 5 lose sleep worrying about retirement preparations. 

Read on to discover three powerful reasons to speak to a financial planner before you retire. 

1. Understand whether you have enough money to retire

How much money is “enough” to fund your retirement will depend on your unique circumstances and goals.

Thinking about how long your retirement could last and what your plans are might help you work out how much you need to accumulate in savings and investments before leaving work. 

A financial planner can create and use a cashflow model to forecast how much income your pension and other savings and investments could provide and how long they might last. They can use this to establish whether you have enough saved for the lifestyle you want, factoring in rising inflation and market performance throughout your retirement.

A financial professional can also work with you to review how your income needs may change during retirement. For example, you might want to factor in the potential care costs that could arise in your later years.

If you don’t have enough for the retirement you want, a financial planner can explain your options for what you can do to bridge the shortfall, such as increasing your pension contributions or retiring later.

2. Ensure that you don’t deplete your pension pot too soon

Since Pension Freedoms legislation was introduced in 2015, you now have greater flexibility in how you can access your pension. You could take some, all, or none of your pension at the normal minimum pension age of 55 (57 from 6 April 2028).

However, if you start drawing flexibly from your pension without a clear financial plan in mind, there is a risk that you could end up using too much too soon. Indeed, just because you can access your pension at 55 doesn’t necessarily mean you need to, especially if you’re yet to retire and don’t need the money held in your pot to live your desired lifestyle.

A planner can support you in identifying meaningful financial goals by showing you the big picture when it comes to your retirement planning. This could reduce the risk of you depleting your pension pot too soon, allowing you to enjoy your retirement, however long it lasts. 

3. Build a tax-efficient retirement income

A financial planner can help you understand how tax rules could apply to you so that you don’t pay more tax on income from your pension and other sources than is necessary. 

For example, you can usually take up to 25% of your pot as a tax-free lump sum when you reach the normal minimum pension age. You could then take a regular income from the remainder or withdraw amounts as you need them, and you can generally adjust the income you take as you go along. Meanwhile, the rest of your pot can remain invested.

However, any funds you withdraw after taking your 25% tax-free lump sum will usually be taxable as income in that tax year. 

Alternatively, instead of withdrawing a 25% lump sum, you might choose to take out smaller amounts gradually to spread your tax-free entitlement over time. 

You can also take multiple withdrawals of which 25% of each is tax-free and the rest taxed at your marginal rate. You could then take care not to withdraw more than your Personal Allowance – £12,570 for the 2023/24 tax year – which is free from Income Tax. 

Seeing a financial planner before you retire can help you create a financial plan that considers your retirement goals and ensures that you manage your income tax-efficiently.

Get in touch

If you’d like to learn more about how to plan your retirement, please contact us by email at info@lloydosullivan.co.uk or call 020 8941 9779 to see how we can help you.

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 planning, cashflow planning or tax 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. 

Workplace pensions are regulated by The Pension Regulator.