Planning for retirement
Friday, 08 October 2021
The whole area of retirement planning and potential care needs in later years are very much in the news now.
I, like many others in their 60s (yes, I know it is hard to believe!) start thinking about life after retirement. Not surprisingly, perhaps, the initial focus is on the financial aspects of retirement; will my pension scheme sustain the lifestyle I want and allow me to achieve those bucket list goals?
If you need to survive on the state pension, I suspect that you might struggle if your aims and aspirations are expensive; that world cruise doesn’t come cheap! The state pension was in line for a more than 8% boost because of the ‘triple lock’ but due to the anomaly created by the furlough scheme, this has been suspended for a second year to be replaced by a ‘double lock’ linked to either inflation or 2.5%. Generally, this has been accepted as a reasonable step to take, especially if the £5bn saved can be redirected to social care.
Hopefully, we have been prudent particularly in our latter years, so have a bit put aside into ISAs and other investments and have a reasonable pension pot. If we haven’t, thinking about this as we approach retirement is too late and consequently, we may have to continue to work to make ends meet, at least part-time, after our state retirement age.
If you are short of cash, you might be tempted by Equity Release, the adverts might sell it as an easy way to raise cash from your house in retirement. However, interest rates are high and there may be better ways to do this e.g. downsizing. There are many options to consider, so you should seek independent professional advice before deciding. I have heard of one case where an elderly person was persuaded to take a substantial equity release, which then sat in the bank with savings of about £200,000!
The way the Government finances and plans care costs for later life is very much in the political limelight, and as I write this, they have announced an increase in NI contributions to help fund care. This is planned to be 1.25% with effect from April 2022 and will also apply to those working beyond retirement age. It has also been announced, but not so widely publicised, that dividend tax rates will increase by 1.25%, meaning that with effect from April 2022 basic rate taxpayers will pay 8.75% and higher rate taxpayers will pay 33.75% on dividend income.
Still on the ‘boring’ stuff, make sure you have made a will, consider getting a Power of Attorney in place and look at making some Inheritance Tax plans, if your estate might exceed the current threshold of £325,000.
Now to the fun stuff, retirement doesn’t mean it is time to sleep, eat and watch daytime TV, it is an exciting opportunity to do things that you always wanted to do but never found time to. Inevitably, when you retire you lose regular contact with your colleagues and business contacts, so you need to build new friendships. You need to find things to fill all that free time but I’m sure for the first few weeks there will be plenty to do; finishing that bit of DIY you never got to, reading that book you always wanted to or getting on top of the gardening.
Many people that I speak to who are retired, say they do not know how they found time to go to work; common themes are looking after grandchildren, volunteering, playing some sort of sport or taking up new hobbies. When I started making a list, there were 100s of ideas, in fact too many to list here, but a few stood out for me that may get onto my list:
- Sport – I already play hockey and intend to continue as long as I can, I am inspired by players I know playing in the England over 80s hockey team. Other possible physical activities include golf, walking/hiking, swimming, squash and pilates.
- Brain work – playing board games (I have started to collect some from eBay), reading, learning a new language, writing blogs, drawing/painting classes and researching family history.
- Activities – gardening, beekeeping, camping, photography, sailing and collecting scouting memorabilia.
- Volunteering – helping at an animal shelter, continuing with the Rotary Club, helping at a charity or a scout group.
Whatever you do, keep active and find something you enjoy!
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