5 important financial considerations you need to think about if you don't plan to retire

Most people create a financial plan at least in part to help them work towards their dream retirement. Yet if you enjoy your work too much to consider giving it up, you may have different ambitions.

If you aren’t working towards retirement in the traditional sense, a financial plan is a vital part of ensuring you can enjoy financial security and wellbeing throughout your life.

Read on to learn more about the financial considerations that could affect you if you don’t plan to retire.

1. What is the end goal that you’d like to work towards?

At its core, a financial plan is a roadmap to achieving your life goals. If retirement isn’t something you want to work towards, it’s important to choose a different goal so that your plan can support you in creating your dream lifestyle.

A helpful goal that you might consider is financial independence. This could offer you enough flexibility to choose the lifestyle you want most, so that you can work because you want to rather than because you have to.

The rest of your financial plan can be designed to take you closer to this goal.

2. Where will you take an income from as your career develops?

Your career may change and develop over the years. So, it’s helpful to think about where your income will come from at each stage of your life.

For example, you might choose to create several different income streams through running your own business (or businesses) or perhaps working as a consultant. Alternatively, you might wish to continue working part-time, withdrawing from your pension or other savings to top up your income.

This can have implications for your tax position, particularly if you are taking an income from multiple sources. Your financial planner can advise you on how to improve your tax efficiency and how to save or invest your income to help you achieve your goals. 

3. Would you like to defer your State Pension?

Your State Pension can offer a regular income in later life starting from your State Pension Age. If you’re planning to keep working beyond this age, though, you might wish to defer your State Pension. This means that you will receive more income from it later on.

If you reached State Pension Age on or after 6 April 2016 and decide not to take your State Pension straight away, the amount you receive when you do take it will increase by 1% a week, provided you defer it for at least 9 weeks. This amounts to around 5.8% for each year that you defer.

If you decide you’d like to wind down or finish working later in life, the deferred State Pension could help to replace the earnings you had from your work.

4. How would you cope financially if you were unable to work due to illness or injury, or in later life?

Even the best-laid plans can sometimes go awry, so it’s sensible to think about how you and your family would cope financially if you were forced to stop working as a result of an illness or injury.

Financial protection can provide a helpful safety net to cover your essential expenses, either temporarily or permanently, if something untoward happened to you.

Additionally, it may be prudent to set aside some savings to cover the potential cost of later-life care. Age UK reports that around 45% of people over the age of 85 have difficulty completing daily tasks such as washing and dressing by themselves. So, while it’s not inevitable, there is a chance you may need some form of healthcare or social support as you grow older. 

The cost of later-life care can be significant. Indeed, Lottie reports that the average weekly fee for a residential care home is £1,232 or £1,470 for a nursing home.

As such, having plans in place for the eventualities mentioned above could help to strengthen your financial wellbeing.

5. Could your estate be liable for Inheritance Tax, and how could you mitigate this for your loved ones?

Continuing to work past retirement age can have implications for the legacy that you will leave to your loved ones after you pass away.

Usually, you would withdraw from your pension, investments, and savings to fund your retirement, reducing the value of your taxable estate over time. But if you continue to earn an income, these assets may not fall in value in the same way.

If your estate exceeds the nil-rate band (£325,000 in 2024/25) and residence nil-rate band (£175,000 in 2024/25) when you pass away, your estate may be liable for Inheritance Tax (IHT). It’s sensible to take steps to mitigate this potential bill so that your loved ones can inherit more of your estate.

There are a few ways you could do this.

Give financial gifts to loved ones to reduce the value of your taxable estate during your lifetime

You have several gifting allowances each tax year, including:

• The small gifts allowance

• The £3,000 annual exemption

• Regular gifts from surplus income

• Gifts for weddings or civil partnerships.

Any financial gifts that exceed these allowances may still be liable for IHT if you die within seven years of giving them.

Make a charitable donation in your will

Ordinarily, IHT is payable at a rate of 40%. If you leave 10% of your estate to a qualifying charity, though, the rate falls to 36%. So, as well as supporting a cause that’s important to you, leaving a legacy gift to a charity could mean that your family pays a lower rate of IHT on your estate.

Read more: The truth behind 5 common Inheritance Tax myths

Get in touch

If you’d like to learn more about how we can help you to be financially independent and continue working for as long as you choose to, please get in touch. Our team of financial planners is based in Towcester and will be delighted to support you.

Email theteam@fortitudefp.co.uk or call us on 01327 354321.

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 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. 

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.