Retirement can, and should, be a positive, fulfilling experience. For many people, it’s a chance to relax after a lifetime of work and spend time on hobbies and activities that are special to them.
But while it can be tempting to think retirement “just happens”, the reality is that it takes a lot of forward planning. There are several important considerations to keep in mind.
The power of hindsight is a wonderful thing. A survey by Canada Life found that 40% of the UK’s retired population have some kind of retirement regret.
From when to retire to financial and lifestyle planning, it can be frustrating to look back and wish you’d done things differently.
We’ve highlighted four of the most common retirement regrets and how you could avoid them.
1. Retiring at the wrong age
It’s important to note that there is no “right” retirement age. This will be a deeply personal decision driven by your individual circumstances.
In a survey by Which?, 1 in 10 people said they felt they’d retired too early, while 1 in 20 thought they had retired too late.
While early retirement might seem very tempting, it’s important to make sure you’re financially prepared. Because you’d be accessing your pension earlier, your investments would have less time to grow.
You also need to ask yourself if you’re ready to stop working altogether. Maybe you’ve spent a long time in your profession and would like to try something different for a few years before you finish work completely. Or you could consider a phased retirement, reducing your working week if feasible.
In the same way, retiring later can bring its pros and cons. Your pension wealth will have had longer to grow while you’re not accessing it. But you might miss out on some of your dreams for retirement, such as travelling – something that may become more difficult as you get older.
The key takeaway here is to define your retirement goals based on your lifestyle aspirations. We can work with you to develop a financial strategy to match, whatever age you choose to retire.
2. Not seeking financial advice
Pension Freedoms legislation introduced in 2015 opened up earlier access to defined contribution (DC) pension schemes. From the age of 55, you can access your full pension fund – 25% of which is available tax-free – with this age rising to 57 from 2028.
You can also make withdrawals from your balance (drawdowns), buy a regular income (annuity), or choose a combination of these options.
Seeking financial advice early helps you understand what the right options are for you, clearly explaining the pros and cons of each. A financial planner can give you accurate, up-to-date guidance, as well as clarify some of the more complex areas of pension planning.
3. Forgetting to factor in lifestyle
Many people spend their lives saving for retirement, without considering how they’ll spend their time, as well as their money.
While money is clearly important, if you haven’t built up social connections or explored your hobbies and passions beyond work, this could well become one of your retirement regrets.
Working out what your lifestyle aspirations are can guide your financial planning, helping to make sure you have the wealth you need to fund your plans.
But simply saving and saving and saving, without thinking about how to have a fulfilling retirement, will leave you with a pot of money and no idea what to spend it on.
4. Neglecting care costs
This is a tricky one, as many people simply don’t like to think about the potential need for care in their later life. While this is completely understandable, it has also been raised as a real retirement regret.
If you have savings or assets over £23,250, then you’ll need to cover the cost of care if you need it.
According to Age UK, paying for care in your own home can cost an average of £25 an hour, while a place in a care home is around £949 a week, and in a nursing home, £1,267 a week.
Including care costs in your long-term financial strategy can offer you peace of mind that, if needed, you can fund your care without compromising your wealth.
Funding options could include ring-fencing certain assets, having a dedicated cash reserve, or releasing funds from your property through downsizing or equity release. Long-term care insurance is no longer available in the UK, but other types of insurance, such as critical illness cover, may help with certain costs.
Even when you have a care strategy in place, it’s a good idea to revisit this regularly, as government policies around care thresholds are in constant flux.
Get in touch
Planning ahead can help to foster a retirement you enjoy, without looking back with regret. We can help you with all aspects of later-life financial planning.
Please get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
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.