When Can I Retire?
When Can I Retire?
Leo Alexander responds to the most commonly-heard comments on retirement and pensions.
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“I have these pensions but I don’t know what I’ll get from them.”
For most modern pensions, there are no limits as to how much you can take from them. But obviously the more you take, the less sustainable the pension actually becomes. It’s also important to consider how much tax you’ll pay on your pension withdrawals.
“I get these statements every year and I don’t understand them.”
Annual pension statements are designed to help you understand what you may be able to get in retirement. That’s based on your current contributions if you are making payments in, and also predicted investment performance.
Although there are various ways you can take money from a pension, most pension statements assume you’ll purchase an annuity at your chosen retirement date. Since 2015, when pension freedoms were brought in, fewer people actually choose to buy annuities. So these forecasts don’t really give you the full picture.
“I would like to take some money out of my pension but I don’t know how to do it.”
These days there are a lot more ways to take money from your pensions outside of buying an annuity. With most pensions you will have a 25% tax free cash entitlement. That can be taken as a lump sum or it can be drip fed as and when you actually need it.
Because of the different options, it’s important to speak to a financial adviser. We’ll recommend which withdrawal option will suit your circumstances and objectives best.
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You might be worried that you don’t have enough, or be embarrassed by something you’ve done – perhaps your pension or investment has gone down in value. But everybody’s in the same boat.
Don’t worry we’re here to guide you through that.
“Some of my friends are retiring early, I would like to know if I can.”
The minimum legal age to access most pensions is 55, although some schemes might allow you to access your pension before that.
The state pension age is currently 67 and it’s due to rise to 68 at some point in the future. But, depending on your other assets and investments, you might be able to retire before you need to access your pension.
“How do you find out if I have enough to retire, and start planning ahead?”
As part of our financial planning process, we offer cash flow modelling. That helps us understand how much you need and want in retirement. What we do is take into account your current income, expenditure and other assets as well as any liabilities that you might have. The cash flow model uses presumptions about rates of inflation and investment returns to predict how much your pension will grow, and how long it could last in retirement.
How can a financial adviser help?
There are a lot of hard decisions to make around retirement – including how much money you can afford to take from your pension and how long you need it to last for. Life expectancies are increasing, so there’s the real risk of people outliving their pensions.
We help you to make the right decisions when accessing your pension to try and meet your objectives and your lifestyle.