5 Key Steps When Preparing For Retirement

Our Chartered Financial Planner, Leonard Birnie, shares his expertise on preparing for retirement. In this first blog in a new retirement series, Leonard shares five key steps for planning for the retirement that you want.

Senior couple preparing for retirement

The most common thing we hear from clients when we ask them about retirement is, ‘I haven’t thought about it, it always seemed so far away!’

This is a great approach for the majority of our lives where we are focused on the here and now, but my job is to ensure that my clients pay attention to what life might look like as they transition into retirement. As part of this three-part blog series, I will be giving my take on the practical steps any individual needs to take to prepare for retirement.

Firstly, I need to offer the following disclaimer. The below information needs to be contextualised within your own personal situation and you must understand your own intrinsic motivations for retiring.

What do you want to get from retirement?

What is important to you when we discuss retirement?

What are you going to spend your extra time doing, what is intrinsically important to you as an individual and what gets you out of bed in the morning?

Deciding to retire is one of the most important financial decision you’ll make in life.

Do not take it lightly – you need to take time to get this decision right as it will potentially impact the next 20-30 years of your life.

With that in mind, here are five quick tips to allow you to plan for the retirement you want.

1. Understand how much you spend, what you spend your money on and what your spending might look like during retirement.

The key here is your lifestyle. What do you want to achieve in retirement and how do you want to live your life? With your choices come financial outlays, e.g. if you like to visit the theatre every week and it costs £50 per week, then you need to budget this in.

Understanding your expenditure is the entry level requirement to living an informed retirement. Without understanding this, you will be guessing at your spending patterns and this could lead to issues further down the line as your nest egg potentially depletes quicker than you expected.

  1. Investigate and analysis your current spending habits. Look through your bank statements, understand where your hard earned money is going each month. This exercise isn’t designed to make you feel bad, it is designed to give you control and put you in a position where you control your money and your money doesn’t control you.
  2. Make a spreadsheet or a list. As a Financial Planner it is a joy to receive a well maintained spreadsheet from a client who understands where they are spending.
  3. Use your expenditure now as a guide to your retirement expenditure. Your expenditure will obviously change throughout retirement, but have a understanding of your baseline costs (utilities, council tax, food costs, insurances, etc) will tell you how much money you need just to break even.
  4. Link your finances to your core values as a person. You don’t get out of bed in the morning to pay your utility bills or council tax – you do those things because they are required. You get out of bed in the morning to do the things you value and that make them happy. How much do these things cost? You should factor in those hobbies and those lifetime trips because they are what make retirement great.

Here is a basic expenditure template to help you get started:

Expenditure analysis

Basic Essential Expenditure
Expenses NameAmountFrequencyDetail
Council Tax
Water Bill
Gas Bill
Food Cost
Lifestyle Spending
Expenses NameAmountFrequencyDetail
Telephone / Mobile Cost
TV / Internet Package
Expenses NameAmountFrequencyDetail

2. Check your state pension entitlement

Not everyone has a full state pension at retirement and the state pension may not always be there in its current form.

Check your state pension here. You will need to create a login.

This is crucial. If you know how much you are entitled to from the state, and when you will receive your state pension, then you are building a better picture of what your financial situation will look like during retirement.

I recently spoke to a couple who completed an expenditure question and needed around £18,000 per annum (£1,500 per month) to accomplish everything they needed each year. The current state pension is around £9,110.40 per person. This helped them realise that that they had their £18,000 per annum by the time they were 67 (their state pension age).

3. Obtain up to date information on all of your pensions and trace any legacy pensions you may have

This is perhaps the most time consuming part of creating your plan for retirement. You need to gather all of your pension information, given our experience we would recommend you obtain the following information:

  1. Updated fund values
  2. Breakdown of your investments
  3. Breakdown of your charges
  4. Contact information for customers

4. Understand your options for each pension and how they work practically in retirement

Research by Citizens Advice Bureau has shown that people are anxious about making sense of pension options, navigating the pension framework and making investment decisions*.

People can often freeze when it comes to making choices about retirement, as it can make it seem burdensome. Retirement should be exciting and one of the most anticipated choices in later life.

Understand the pensions you have, how they work and that your choices are critical in crossing the retirement finishing line. There is a lot of confusing terminology, but Financial Planners will be able to provide guidance regarding your choices and the best options to achieve your goals.

Once you understand your pensions, you can be confident in making the best choice moving forward and how to properly fund your retirement using the funds you have saved during your working life.


5. Wills and Powers of Attorney

Part of any well rounded plan involves having a Will in place to ensure that your hard earned money goes where you want to it after you are no longer here.

You may also wish to consider having Powers of Attorney in place enabling people to make financial or health related decisions on your behalf if you have an accident or an illness and are unable to make your own decisions.

Tips for retirement planning infographic

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Contact us

To discuss your retirement options, please contact Leonard Birnie at leonard.birnie@taitwalker.co.uk.

This blog is for information purposes only and should not be seen as advice or a recommendation to act. You should always seek independent financial advice before taking any action with your pensions.

Tait Walker Wealth Management is a trading style of Tait Walker Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Company Number 5674020. Incorporated in England. Tait Walker LLP trading as MHA Tait Walker Wealth Management is a member of MHA. MHA is an independent member of Baker Tilly International Limited, the members of which are separate and independent legal entities.