When do I intend to retire and how much will I need in income and savings to fund my retirement from that date?
Many individuals will need some help with these questions. The first two are intrinsically linked as the later you retire the less time you will spend in retirement and a shorter retirement requires less funding.
For many, the use of cash flow planning will aid decisions. This will map out your income and expenditure over a lifetime so that you can see whether your money will last as long as you do. Amendments can be made along the way to take account of changing circumstances and this document can be seen as your roadmap to the retirement that you want.
Am I on track to achieve that level of funding?
Whilst a financial adviser can help you with your cash flow analysis they will need to understand what your retirement will cost. Only you know what you want your retirement to look like and you will need to have that picture in your mind when you meet with any planner.
Once it has been ascertained what your retirement is going to cost if you retired today the cash flow analysis can take account of potential investment returns and the likely effects of inflation to ascertain whether you are on track.
If not, what will I now do to get myself on track?
If you are not on track you will need to make decisions about how you can get yourself to your retirement goals. This may be by reducing current expenditure to put extra aside for your future or it may be by accepting a picture of retirement that costs a bit less.
Your other option may be to work a bit longer and therefore reduce the length of your retirement. All these options can be mapped out for you and help you in making your decisions.
Once the basic plan is in place the next decision is where to save your money? There are a number of investments that offer tax incentives either at the time of the investment or when you take the benefits. Making the most of your money now and in the future will be the goal of any investment plan whilst ensuring that you are not taking any more risk with your money than you either want or need to
A retirement plan
A retirement plan is likely to include some form of pension as well as the use of individual savings accounts (ISAs). These are both tax efficient in their own way but offer different ways and restrictions on how benefits are taken. Because of the valuable tax breaks with these investments the amount you can put into them each year is restricted. So, for many, it will be necessary to build up funds elsewhere as well.
Other types of investment plans have different tax advantages. The benefits of these very much depend on your tax position now and at retirement and also your appetite and ability to take risk but can add further flexibility to overall
Whatever the final outcome of the plan, it needs to be individual to you and flexible enough to adapt if your circumstances or needs change as you move towards your retirement goal.
Your investments can go down as well as up. You may not get back the amount you invested.