Retirement may be looking a good deal less attractive for many people these days.
A generation or two ago, turning 65 meant giving up work, a state pension and probably an employer’s pension too. It might have been enough to live fairly comfortably for many people – especially as retirement tended not to be very long. In 1960 the average life expectancy in the UK was only 71.
These days, as a population we can look forward to many more years with an average life expectancy of around 80.
Some people might not want to spend all those extra years in quiet retirement. Others might not be able to afford to.
Flexi retirement might provide the answer.
What is flexi retirement?
The old phenomenon of being hard at work until the day of your 65th birthday, being presented with a carriage clock and never working again is becoming rare.
Carrying on working but adopting a more flexible approach to the hours actually worked is becoming widespread.
Flexi retirement means cutting down the time we spend at work and increasing the leisure time we enjoy – perhaps gradually. It lets you flex into the idea of increased leisure time, whether that involves taking up a new hobby, making new friends, or turning an existing interest into a new small business.
You might work only three days a week for example or take on shifts when it suits you.
It can be better for your health…
Some prefer to keep working because they enjoy what they do and especially if they have their own business to run. Suddenly changing to a sedentary lifestyle after years in a strenuous job may seem to trigger medical problems. Cutting down hours gradually can be a healthier option, providing more time to find new activities and interests – the skills you need to make the most of retirement.
There is evidence that if you enjoy the stimulation, job satisfaction and social aspect, continuing work can provide physical and mental health benefits. Some retirees find that without the routine of regular work, they become depressed, and experience a sense of a lack of purpose.
It can be better for your wealth, too
But liking what you do is not the only reason to think about flexi retirement. Others will need to keep working for financial reasons, keeping an income coming in, and continuing to build their pension pot for when retirement really comes around. Thanks to compound growth, an extra year or two of pension contributions could potentially increase the size of your pension pot, this would hopefully increase the level of your pension income.
How to finance flexi retirement
Flexi retirement increases your financial options.
In the bad old days, when retirement was compulsory and you could only buy an annuity with your pension pot, formal retirement was often the only option. Pension freedoms, which mean greater flexibility with the way you use your pension pot have made flexi retirement much easier to arrange than it used to be.
There are several routes to consider.
You may be able to arrange reduced hours working with your existing employer or look at getting a new part-time role that gives you the hours and the job satisfaction you want.
You can access your pension pot from the age of 55, and still go on to take your state pension at the state retirement age. There is still no need to stop work if you do so.
You can top up your income with withdrawals from your pension pot. Or, if you have enough money coming in from part-time working you can simply leave it invested and hopefully continuing to grow. If you have sufficient income, you can even continue paying into it.
The important thing is to plan how your finances will work and to remember that flexi retirement may be a little more complicated than stopping work altogether. Avoiding the risk of paying too much tax, especially if you make withdrawals as well as contributions to your pension pot demands real expertise.
To ensure that you make the most of your money as well as your flexi retirement simply call the Continuum team.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable retirement strategy, you should seek independent financial advice before embarking on any course of action.
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits.
Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.