Not so long ago, retirement was viewed as the end of the journey. Most people would retire when reaching state-pension age and the job of saving and investing would be largely complete. However, that’s not the case anymore. Perhaps a characteristic of these unusual times, retirement is very different to how it used to be.
Rather than the end of the journey, when you retire now it is perhaps more of a new road. As a result, savings and investments are required to be more dynamic now.
But how did we get to this point? The decline of final-salary pensions, and the ‘pension freedoms’ that opened up access to pension savings and introduced new flexibility around retirement-income decisions are two of the factors that have combined to transform the retirement landscape. Add to this rising longevity and many people are now viewing the retirement journey ahead somewhat differently.
You used to get to a certain age and stop working and saving. But people are realising that the ‘set-and-forget’ approach doesn’t really exist anymore. There are so many choices you will be faced with as you plot when you retire that it can be quite the minefield.
Making timely decisions for when you retire
With most people now entering drawdown on retirement and remaining invested, the option of putting your feet up and letting your pension income look after itself is off the table. While the modern approach offers greater choice and flexibility, this presents more decisions that need to be made.
Many people realise that retirement may last for up to three decades or more. Therefore, decisions that you make at 60 may not be appropriate at 65 or 70 and so on. Retirement isn’t a fixed line and decisions will need to evolve. You may even end up returning to work, starting a business or embarking on a new career. It’s the same as your working life, with ups and downs and changing circumstances.
While there’s plenty of flexibility and freedom, there’s also a huge amount of responsibility. Many people are still getting to grips with what the changing pension landscape means for them and what they need to do.
Some of the decisions that you’ll need to make include where to source your income from. Are you taking it from the right assets? Are you taking too much income or too little? Are the underlying investments structured in the right way or do you need to reconfigure them? This is where it really pays to have an adviser in your corner to figure it all out.
Make sure that your pension still fits your current values
Other factors that may arise at certain points during your retirement will also come into play too. Just because you’re retired, it doesn’t mean to say that your values and priorities won’t evolve. There will will also be new stages of the journey to navigate, such as how to meet long-term care costs and how to manage inheritance tax.
A topical focus for many retirees is the way that they engage with climate change and use their retirement money as a force for good. With a sizable proportion of pension savings still invested in retirement, retired investors can make a difference by having a say in how and where their money goes. But while there are more ways than ever before to invest your pension in a way that benefits future generations, there are a lot of choices to make here too.
The way that your investments are structured and how your money is invested can help you make an impact and a difference. Investment plans, and other financial arrangements will need to dovetail with short- and long-term goals that are likely to shift over time.
So make sure that you regularly review the decisions you’ve made in your retirement and update and review where necessary.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
If you found How to prepare for a ‘new beginning’ when you retire, helpful you’ll find more savvy retirement tips in Sharon’s monthly column.
About the Author / Sharon Bonfield
