Can a financial planner really help you to retire earlier?
“When might I be able to afford to retire?”
You have probably asked yourself this before, especially if you’ve already begun planning for your retirement. With the State Pension Age rising in the coming years from 66 to 67 (and ultimately to 68), and the cost of living crisis continuing, it’s natural to feel apprehensive about the prospect of funding your retirement.
But recent research has revealed a simple way to allay these fears. Read on to discover how consulting with a financial planner could help you to retire earlier than planned and to fund your retirement for longer.
Those who have taken financial advice expect to retire 3 years earlier on average
Research undertaken by Standard Life has revealed that people who take financial advice about their retirement experience a range of benefits.
Those who had taken financial advice ahead of their retirement shared the following insights:
They expect to retire, on average, three years earlier than people who did not take advice – at age 66 compared to age 69, respectively.
They expect to be able to fund their retirement for 23 years before needing to make cutbacks, compared to just 17 years for those who did not take advice.
They feel better equipped for their later life than those who did not take advice.
The study discovered further benefits of taking financial advice for people who were already in retirement.
It found that, of the respondents already in retirement, almost all of those who had done a great deal of financial planning (92%) or a little bit of financial planning (86%) were enjoying their retirement. Only 72% of those who had done no financial planning could say the same.
23% of those who hadn’t taken financial advice wish they had planned more thoroughly for retirement
As well as improving your expectations about retirement, financial planning can improve your experience of retirement.
In the survey, 23% of respondents who hadn’t taken financial advice said that they needed more money in retirement than they’d anticipated, compared to 19% of those who had taken advice.
In addition, almost a quarter (23%) of people who didn’t take financial advice wish that they had planned more thoroughly for retirement. This was also true of wealthier people who had a retirement income of £40,000 to £49,000 a year.
A financial planner can help you with many different aspects of retirement planning
A financial planner has a plethora of tools available to help you plan your retirement and create stability for your family. Here are just a few of the ways they could help you.
Understanding how much you will need to save for retirement
When you work with a financial planner, the answer to that original question of when you might be able to afford to retire will become much clearer. Your planner can use cashflow modelling software to help you to visualise exactly how much money you are likely to need at any given point in your life.
The software works by analysing data such as your income, expenditure, assets, and expected income and expenses in retirement, alongside key dates, such as your retirement date, and assumptions about investment returns. It can then produce an easy-to-read graph forecasting your likely income in retirement and any potential shortfall.
The data helps your planner to recommend appropriate steps that you can take now. This can help you retire when you’d like to and be in a better position to afford the lifestyle you’d like to have in retirement.
Creating a plan to help you retire when you’d like to
Retirement looks different for everyone, and it no longer needs to be the traditional “cliff-edge” type of retirement that it used to be.
You might want to finish working on a set date and transition into retirement overnight. Or perhaps you’d prefer to start by reducing your hours or working on an ad-hoc basis.
Your financial planner can help you to decide what kind of retirement would suit you best and help you to create a plan that allows you to bring this idea to life.
Helping you to save for, and withdraw from, your pension tax-efficiently
Tax liabilities can become confusing and costly as you enter retirement and begin to draw from your pension. Acting without properly understanding the tax implications of your decision could land you with additional tax charges and even push you into a higher tax bracket.
Working with a financial planner who is well-versed in the tax liabilities of pension withdrawals can help you to understand the rules. As a result, you can start to withdraw your pension with confidence, reducing your risk of additional tax charges.
Protecting against financial risks
When it comes to retirement planning, it’s not just about saving up plenty of money to live on. You should also consider the risks that could throw your financial plan off track and create difficulties for you or your family.
For example, what might happen if you become very ill and require daily medical care – could you cover the costs of the care on your expected retirement income?
What if you are diagnosed with dementia – would your spouse or children be able to look after your financial matters in the event that you lose the mental capacity to do so?
It can be scary to think about these things, which is why a lot of people put off making a plan for it. But having plans in place, such as a Lasting Power of Attorney (LPA) and critical illness insurance could help to relieve the burden of “what if?” and provide peace of mind for your whole family.
Your planner can help you to identify the risks to your financial security and suggest the right steps to take that could mitigate that risk or help you to cope if the worst should happen.
Creating an estate plan that gives you peace of mind
Retirement planning can extend further than your own retirement – in addition, it’s important to make a plan for what you want to happen with your estate after you pass away. It’s another potentially uncomfortable topic, but by tackling it head-on, you can reduce your own concerns and provide peace of mind for your family as well.
The first thing to decide is what you would like to happen to each of your assets after you pass away, and your planner can suggest the most appropriate and tax-efficient way to transfer those assets.
Your planner will also be able to suggest which types of documents you should have in place. A robust estate plan will usually include:
A Will
An LPA
An “expression of wish” for your pension.
You can read more about the four most important documents you should create today on our website.
Get in touch
If you’re looking for a reliable financial planner in Towcester who can help you to prepare for the retirement you’d like, we can help. Email theteam@fortitudefp.co.uk or call us on 01327 354321.
Please note
The Financial Conduct Authority does not regulate estate planning, tax planning or Will writing.
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 results.
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 Financial Conduct Authority does not regulate cashflow planning.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.