Top tips to transition to retirement

Life is made up of changes. The change that came with your first day at school, the change from school to college, from student to worker, singleton to part of a couple – and the change from worker to retiree.

All need the right preparation. At Continuum we are looking at the transition into retirement, and at the preparation you need to make it successful.

Preparing for successful retirement

There are two main areas that you need to consider when you are looking at retirement; psychological and financial.

The psychological side of giving up work can come as a shock. Many people look forward to a life of leisure once they retire, without really deciding what a life of leisure means for them.

Collecting your gold watch does not condemn you to golf and garden centres, but you do need to plan how you will use all the time that you suddenly have. If you have hobbies, think about how much more time you will spend on them. 

If you don’t have any leisure interests now, perhaps you should start developing some. 

Many people who do retire complain of boredom. You need to keep both your mind and body active, especially if you have had an active occupation. Learning a language, woodwork, volunteering at a local charity, the list is endless. Sitting around and doing nothing is destructive both physically and mentally. Ensuring that you have plenty to do not only helps you enjoy your retirement, it can help you enjoy it for longer.

Remember, leaving your primary career need not mean giving up work altogether. Transitioning to part time work or becoming a consultant may help make the change easier and provide help with the financial challenges too.

Don’t leave things until you have retired – start looking at how you will spend your time well in advance, not forgetting that consideration may need to be given to your tax position at the time.

Preparing financially for retirement

It is often the financial side of retirement that worries most people – and once again, preparation is essential.

  • Work out your income. You should be able to get a clear illustration of what your pension pot will be, and the kind of income it can provide from your pension provider.
  • Work out your monthly expenses. For those with their mortgage paid off and the need for commuting over, many will find that their outgoings will be reduced. However, you will still need to eat, run a car and put the heating on, and for some people, possibly having to pay a mortgage. There will be a minimum you will need to cover, and you should include a contingency for the inevitable unexpected costs – such as a boiler repair or a medical expense.
  • Deal with debt. Living within your means is essential when those means are more strictly limited, and debt can eat into your future spending power.
  • Think long term. Will there be a need to downsize to a more manageable home, will you expect to pay for care, and need to budget accordingly?
  • Look at your investments. Your needs may have changed and capital growth may well need to take second place to security and an income to supplement your pension. 
  • Think about your life insurance. Your need for life insurance does not vanish when you retire. If you have a partner to provide for, a whole of life insurance policy might be the most cost-effective way to provide security for them and peace of mind for you both.
  • What about your home? Should you look at equity release to free up some of the profit it may have made for you, or should you downsize?
  • How will you pass on your wealth when the time comes, and will your loved ones be receiving it, or will the taxman be helping himself?

With all these points to consider, the transition from worker to retiree can be a complicated one.

Getting some help

Managing the financial transition into retirement involves every aspect of your financial arrangements. Getting help with the transition is essential to maximise your available resources, minimise your tax position and ensure your financial security.

To get that help, simply contact us at Continuum, and ask about retirement transition planning.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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.

The value of investments can fall as well as rise and you may get back less than you invested.

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