Personal Retirement Planning West Kirby
No matter what you age, it’s never too early to start looking at your own personal retirement planning.
Our West Kirby personal retirement planning feel your first consideration should be the age you wish to stop working and generate your income for life, from other sources. This may well be governed by your job role (deep sea divers for example retire under age 40). Have you thought about what your life will be like in retirement? Do you have plans to travel, take up hobbies, spend time with family and grandchildren etc.?
There is a cost to these activities as well. Retirees generally spend around 20% more per month in the first five years of retirement. So if your household monthly expenditure is £2000 a month now, make a budget for retirement years expenditure of around £2400. You will also need to factor in travel and capital purchases. Do you plan to have expensive holidays, change the car or pay off a mortgage and renovate the home?
It can be difficult to picture life without work, so take a look around at those of your friends and family who have retired and get a feel for they way they live. It’s a great place to start.
As your independent financial planner, we need to plan all the expenditure you have outlined to ensure your retirement income needs those needs. So what constitutes retirement income?
State pension. This is being paid later and later in life. Have you checked what date and the value of your pension yet?
Pension plans. These take many different routes with lots of names: workplace pension, SIPP, SASS, section 32 buyout, personal pension, stakeholder, the list is endless and very confusing to most people.
ISA’s There are two types, cash and investment ISA’s. Depending on your appetite for loss of capital will make the decision for you to use cash or maybe look at investing for greater growth. The key driver here is capacity for loss and what your investment return needs are to fund your lifestyle in retirement. We ask you to complete a survey to assess your risk attitude and then discuss what options you can look at.
Property. Lot’s of clients have buy-to-let’s as investments and see this as a low risk way to generate an income in retirement. However there are lots of risks associated with this route. You should factor in void periods when the properties are empty, management fees (10% per annum) for taking care of the tenant, tenant search fees when you have no tenant in situ, maintenance costs involved with gas and electrical safety, plus refurbishment on an ad hoc basis. Income from properties is taxable under self-assessment and accountant fees should be factored into your net returns.
There is also lifetime planning issues with this route. Capital gains tax may be due when you sell a property and how will you pass these properties on to the next generation when you have gone? Does this lead you to have inheritance tax issues in your estate? Has the calculation been done for you?
Investment bonds. These types of investments are great for high rate tax payers as the funds grow tax efficiently whilst invested and you can take up to 5% return of capital back each year tax efficiently. This can be paid monthly so it looks like income each month into your accounts.
Our advice would be to look at the tax, risk, income and expenditure needs of you and your family, both prior to and in retirement up until you pass away. This forward thinking approach will lead to you having a retirement income plan that fits you for the longer term
Speak to our West Kirby IFA and retirement planning team today for a FREE West Kirby personal retirement planning review.