4 Essential Financial Steps Older Adults Must Take before Retirement

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Are you financially ready for retirement? When you are younger, it is easy to ignore this question, but as you enter your 50s, you need to have a plan. It doesn’t need to be difficult. In fact, if you follow these four simple steps, you will be well on your way to preparing for the best years of your life.

Figure out How Much You Have and What You Will Need

Your top priority should be getting your pensions and other savings in order once you are within five or ten years of retirement. This could mean building society accounts you took out long ago or finding old company bonds and pensions held with financial institutions. This process can take weeks. Then, decide on the income you will need for your standard of living once you retire. A great way to do this is to look at your current budget and adjust it for your retired life. For instance, you will not need to spend on work clothes and commuting costs, but you may need extra savings for travel.

Make the Most of Your Savings

One way to get the savings you need for retirement is to save as much as you can now. If your employer contributes to a company pension, make full use of it. You can take advantage of tax relief by setting up a self-invested personal pension. You can make the most of tax relief on contributions by recycling pension money. If you are between 55 and 75, you gain a tax advantage when you withdraw from your pension pot (as much as £7,500 a year) and put some back in.

Consider What Income Strategy Fits Your Needs

Older adults typically want a regular income that covers basic expenses in addition to having their money flexibly invested so they can keep growing their savings. This problem is solved by a dual approach to drawdown and annuities. This arrangement works by using your final salary pension, state pension, and annuity (when necessary) to guarantee a steady income. Drawdown is used on top for long-term growth and flexible income. Some retirees also consider starting a small business to add an extra income stream during their golden years. It doesn’t need to be a full-time commitment, but just something that you can do flexibly to fit around your retirement lifestyle and offer a great work-life balance.

Keep Your Investment Portfolio Balanced

The investment needs for most people in early retirement will be met by a balanced portfolio of shares, bonds, and stocks. For instance, you might invest 26 percent in a FTSE All Share fund, 45 percent in global bonds, and 29 percent in global shares and stocks. You might also consider injecting a little risk into your portfolio by investing in emerging markets.

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Derek

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