Planning for your retirement needs serious consideration and financial planning, this should not be left until the last minute.
The financial decisions you make when planning for your retirement will be in place for the rest of your life this could be up to thirty to forty years, in some cases even longer.
When planning for your retirement, you will need to consider the following factors.
- The level of income you require to maintain your lifestyle
- Amount of guaranteed income you wish to receive
- Level of your Spouses independent income
- The effect of inflation on your retirement plan
- Your State of health today
Factors such as your investment portfolio need to be reviewed, depending upon the retirement income and products you wish to use.
Pension annuities provide a guaranteed income for life; however, this is not as straightforward as it seems.
You will need to decide if you wish for your retirement income to increase each year and if you would like it to be payable to a dependant in the event of your death. If you would like this to happen then there could be a reduction in the level of income you would receive.
When looking to purchase an annuity, your choices will impact the level of income that you will receive.
Annuities can be underwritten based on your health (enhanced annuities) and you should always compare your annuity offer to the open market to maximize the level of income you may receive.
If an annuity is appropriate for you it is generally advisable that you should reduce the investment risk within your portfolio as you approach retirement. This will negate large investment fluctuations as you draw near to retirement.
As annuity rates are near all-time lows, many of our clients prefer to leave their capital invested and draw a regular income from it, this is known as drawdown. Drawdown enables you to retain flexibility over your pension options and allows you to delay purchasing an annuity until you feel that an annuity provides value for money, should you wish to purchase one at all.
The drawback to having more flexibility with your Pension over an Annuity is that your Pension fund remains invested. This means that if investment returns are poor or there is a substantial fall in the value of your investments, then there is the chance that your retirement fund could deplete prior to your life expectancy.
At Howard Wright, we provide a range of risk-focused actively managed investment portfolios designed to assist our clients to achieve their income objectives in retirement. If drawdown is suitable for you, then there is usually no need to reduce the level of investment risk you are taking prior to your retirement. Further considerations may need to be made if you intend to withdraw a tax-free cash lump sum.
Your existing investment arrangements also need to be reviewed to ensure that they offer drawdown if this is to be an option to be considered.
Retirement options Report
At Howard Wright, we have developed our very own retirement options report, this covers all of the above issues in detail with illustrations bespoke to your personal circumstances. One of our Chartered Advisers will then recommend and implement a suitable product or range of products, targeted to meet your retirement objectives.
The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.