How to prepare your finances and make the most of the decade before retirement
With retirement costs rising and people potentially spending several decades in later life, the decade before retirement is an important time to review your financial plans. Having around ten years to go gives you the opportunity to identify any gaps and make adjustments while there is still time to act.
Retirement can look very different from one person to another. You may want to travel, spend more time with family, pursue hobbies or simply enjoy greater financial freedom. Understanding what you want from retirement is therefore a useful starting point for working out how much you may need.
Picture your future
Think about when you would like to retire and the lifestyle you hope to enjoy. Consider expected spending on essentials such as housing, food and utilities, as well as discretionary costs such as holidays, hobbies and helping family members.
It is also worth considering how your spending could change over time. You may spend more on travel and activities in the early years of retirement, while healthcare or other costs could become more significant later on. Don’t forget to allow for unexpected expenses and rising living costs.
Take stock of your pensions
Review your current pensions and obtain up-to-date information on their value and projected benefits. If you have worked for several employers, you may have accumulated multiple pension pots, so make sure you know where they are and understand how each one works.
Check whether you are making the most of available employer contributions and pension tax benefits. With around ten years to go, increasing contributions where affordable could make a meaningful difference to your eventual retirement income. It may also be worth reviewing your State Pension forecast and National Insurance record.
Review your wider finances
Your pension is unlikely to be your sole financial resource. Review your savings, investments, property and other assets alongside your expected State Pension entitlement. Consider any outstanding debts and whether you want to reduce or clear them before retirement.
Think about your emergency savings too. Accessible funds for unexpected costs can reduce the need to draw on your pension at an inconvenient time. Inflation is another important consideration, as the income you need in retirement may be higher than it appears today.
Plan how you will take income
It is important to consider not only how much you have saved, but also how you will turn those savings into income. Depending on your circumstances, you may have options, including flexible withdrawals or securing income through an annuity.
Taking too much too soon could leave you with less money later in retirement, while being overly cautious could mean you don’t enjoy the lifestyle you have worked towards. Understanding the balance between income, investment risk and the length of time your money may need to last is therefore essential.
Use the next decade wisely
Ten years before retirement is a valuable opportunity to take stock rather than waiting until your final few years of work. Reviewing your plans regularly can help you respond to changes in your income, investments, family circumstances and retirement goals.
It is also worth considering your wider plans, including when you might stop working, whether you would consider part-time employment and what you want to do with your time. A clear picture of your financial and lifestyle goals can make retirement planning more meaningful.
Get ready with confidence
Professional financial advice will help you assess whether your current strategy is likely to meet your objectives and identify potential changes that could improve your position. A review can also help you understand the potential tax implications of your decisions and how different assets could work together.
The decade before retirement can pass quickly, but it also offers valuable time to prepare. Taking action now can help you understand your options, address potential shortfalls and build greater confidence for the years ahead.
This article does not constitute tax, legal or financial advice and should not be relied upon as such. For guidance, seek professional advice. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028, unless the plan has a protected pension age). The value of your investments (and any income from them) can go up or down, which would affect the level of pension benefits available. Investments can rise or fall in value, and you may receive back less than you invest.