Whether you’re going to be retiring soon or in a few years’ time, it pays to be as prepared as possible and to plan your finances in advance. You should start financially planning your retirement funds at least two years before you stop working.

Do you require help or guidance on planning your retirement income? Speak to a financial advisor by using our unique matching service at Financial Advisor UK. Our national network of fully FCA-registered and approved professionals can offer you the best advice while providing information on the right deals available for pension plans, annuities, life insurance and investments for your future.

Here’s what you should be doing to carefully plan your finances for retirement.

Calculate your retirement income

The most important part of this step is that you will need to figure out how much income you’ll need to live on in retirement. Firstly, obtain a statement of your State Pension. This will let you know how much you will receive directly from the government based on the number of National Insurance contributions you have made during employment.

If you have a defined benefit (DB) or defined contribution (DC) pension, the next step is to obtain recent records of these funds to see how much is in them. This will indicate how much money there will be to access when you retire. Get in touch with the pension provider for more details, discard any old statements and request up-to-date paperwork. You should also take this opportunity to track down any lost pensions that you may have forgotten about. This can be a problem if you have worked for many different employers during the course of your working life. The Pension Tracing Service can help you locate a lost pension, and is a free service provided by the government.

Finally, calculate any other investments or savings pots you may have accumulated for your retirement or later life. These funds could potentially be used to boost your retirement income.

Re-assess your investments

If you have a personal pension or defined contribution (DC) pension, it is likely that your pension fund will be tied up in investments. You will need to reassess how much risk you want to take with these funds, especially as you will be needing access to them later. As you are getting closer to retirement, it makes sense to lower the risk factor in these investments. This should be done around 10 years before you retire, ideally. You can discuss your investment options with a financial advisor from Financial Advisor UK, who can advise you on lower-risk investments.

Find ways to increase your pension pot

In order to enjoy retirement and live a comfortable lifestyle, you’ll need to make sure that you’re boosting your pension pot as much as possible, and that you have as much money to live on as you had imagined when working. If you have realised that you have less money in your pension pot than you had envisioned, use the time you have before you retire to increase funds as much as possible. You can do this by paying more into it (when working) before you retire, or postpone the date you start drawing your pension, so you have more funds when you start eventually drawing money from it.

Calculate your everyday retirement living budget

How are you planning on spending your retirement? Are you going to be spending money on lots of luxuries? Taking a few more holidays? Taking up a new sport such as golf? You’ll need to calculate how you are going to spend your days in retirement so that you can make sure you have enough money for such activities. It is likely that you’ll have less money to live on in retirement than you did when you were working, unless you are on a final salary pension scheme with lots of benefits, or have lots of investments to reap benefits from. Make sure you have paid off any debts, and calculate what your everyday living costs will be. Consider bills and utilities, mortgage (if you haven’t yet paid this off), food, clothing, medical care and so on. You’ll also need to consider leisure activities and transport. You may find that your spending goes up in some areas, but comes down in others. Consider if there are any changes you need to make in order to live comfortably. Remember that your retirement income will not be like when you were working – if you spend it, you can’t do some overtime to make a little extra through your employer. Plan your expenditure carefully.

Pay off your debts

No-one wants to be in the position of owing money in old age and retirement. Your retirement is for enjoying yourself after many long years of hard work. Start your retirement being debt-free if you can. Figure out how much you owe on any debts, credit cards, mortgages, personal loans and so on. Calculate the interest you are paying on such debts. If you can, pay off the debts with the highest interest rates off first. If you decide to take part of your pension as a tax-free lump sum, you could use this to pay off your mortgage or other debts, so that you are starting retirement without owing money. However, if you have a DB pension scheme, taking your lump sum may be more expensive and reduce the amount of pension income you receive. Always get financial advice first before drawing your pension. Our advisors at Financial Advisor UK can offer guidance on making the most of your pension, and calculate how you can use your funds to become debt-free in retirement.

Consider when you’d like to start drawing your pension

You’ll need to have a date in mind for when you begin drawing your pension. Remember that you must be aged at least 55 to begin drawing your pension, unless you need to take early retirement due to Financial Advisor UK health or long-term disability.

You can check with your pension provider to see when you can start drawing your pension, and decide whether you still want to keep the start date as it is. There are also many options about how you can draw your money from your pension, depending on the type of fund you have and whether it is a DC or DB scheme. If you have worked for the public sector, there will be rules around when and how you can access your money. It may be in your financial interests to transfer your pension, but you should never do this without first speaking to a financial advisor. It is also possible to delay when you take your State Pension, so you receive a higher amount when you do start drawing it.

To talk through all of your pension options with our FCA-regulated advisors, use our easy matching service to be paired with a financial professional who can answer all your queries and help you make the most of your retirement fund.