Things to Think About at Retirement

Are you approaching retirement? For those who are, it can be apparent that a challenging transition is ahead. Not only will your day to day way of life change, but your financial circumstances will also see massive alterations. Financial aspects of retirement are those that require the most forward planning to help alleviate unnecessary stresses and strains on you and your family. But what exactly should you consider when thinking ahead?

Consider what type of income you will require from your pension fund. This means thinking about the ways in which to convert your fund into an income and what will be best for your personal situation and way of life. Two of the most common ways of receiving a pension income are: Annuity and income drawdown. These both have their advantages and disadvantages.

Two of the key factors in deciding which income type will be most effective is to look at the longevity and sustainability of the chosen type. Money decreases in value over time due to inflation and interest. For those who chose a fixed lifetime annuity, you retirement income will stay the same even though the value of your money will decrease. Ensure you have a “future proof” pension income that makes the most of the funds that you have worked so hard to put by.

Think too about how flexible your income will be and how often you will be able to receive any income. Will it be weekly, monthly, quarterly, or even in a lump sum once during the year? Timings could influence exactly how your pension will be best converted into an income.

Aside from deciding how you will convert your pension into an income, you will have to consider how your income level will affect your lifestyle. Will your income be significantly lower than when you were working? And if so will you be able to supplement it in some way or will you have to adjust your lifestyle accordingly. It’s not uncommon for retirees to downsize their home in order to cut back on expenses during retirement.

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