Financial expert warns 'five key things to consider before you retire' that many forget

state pension

State pension age is currently 66 in the UK (Image: GETTY)

Those retiring soon are urged to consider all aspects of retirement rather than just income, or they risk losing out on comfortability and ease when they stop working.

For many approaching retirement, their number one question is “have I got enough to have the retirement I’d like?”

Those hoping to retire soon need to tackle this issue head-on to work out whether retiring now is right for them and come up with a plan.

Shona Lowe, financial planning expert at abrdn has spoken exclusively with about what soon-to-be and current retirees need to consider with their retirement planning – from considering future care costs to having a plan to pass money onto loved ones.‌

1. Could flexi-retirement be an option?

For many, gone are the days when retirement meant stepping back from the world of work altogether in one go. Instead, there is an increasing number of retirees who intend to do some sort of work even once they’ve officially “retired”.

income tax explained

After someone has retired, they still have to pay Income Tax on income over £12,570 (Image: GETTY)

Retirees are continuing to challenge the norms when it comes to enjoying their next chapter. Whether it is setting up businesses, pursuing a ‘flexi-retirement’ and working part-time, or doing whatever it is that makes them happy – retirement is different for each individual.

Ms Lowe said: “Planning the practicalities of filling your time is one thing but it’s also vital that people prepare mentally for retirement. Whilst stopping work will give far more time for friends and family, hobbies and holidays, work and employment often provide a lot of social engagement and the self-esteem and confidence that comes from being needed and doing a good job.

“Flexi-retirement is one way to adapt to those changes over multiple years. The meaning of retirement is changing, so take the time to think about what you want and don’t be afraid to do what you can to make your retirement right for you.”

2. Navigating the cost of living

The rising cost of living, fuelled by inflation and interest rates, is weighing on many minds, particularly those of current or soon-to-be retirees.

Even with state pensions keeping pace with inflation, those who will need to rely on them to fund retirement should check their state pension forecast to find out how much they will get and when and review their expenditure plans to check they can match.

The same goes for those planning to use money held in cash. With inflation currently at 6.8 percent, the value of any money sitting as cash is declining in real terms and those relying on it risk it being used up sooner than they may think.


A quarter of one’s pension pot is usually tax-free (Image: GETTY)

‌That’s why retirees need to make good decisions, understand all their potential sources of income and capital and seek professional support, more so now than ever before, so that they can make their money work as hard as possible and last as long as possible.

3. Get on top of taxes

Retirement brings with it a lot of change – change to routine and to income, but also to the tax people have to pay.

‌After someone has retired, they still have to pay Income Tax on any income over their Personal Allowance, which currently sits at £12,570. However, every pension investment or savings pot someone has may be taxed differently and people will need to be tax-savvy when it comes to planning how and when they take withdrawals from each.

Ms Lowe added: “Before retiring, it pays to understand the tax allowances you could be eligible for, the tax treatment of what you have, how much you will need to withdraw each year and how that could impact your tax bill.

“For example, a quarter of your pension pot is usually tax-free, and you’ll pay income tax on the rest. If you’re not sure about the best course to take to ensure you can make your retirement income as tax efficient as possible, consider speaking to a financial adviser for personalised, expert advice.”

‌4. Realise the power of gifting

When it comes to retirement, it’s important to make the most of one’s savings and make sure they’re meeting their individual needs. However, if leaving a legacy is important to someone, it is never too early to start thinking about how to pass on what one has while they’re around to see people benefit or how people can increase the amount they eventually pass on.

Ms Lowe continued: “Giving lifetime gifts can reduce future inheritance tax, but our recent research found that more than two-thirds (62 percent) do not understand how much they can gift each year without paying tax.”

There is an annual allowance of £3,000 which lets UK taxpayers gift up to this amount each year to a single recipient or split between multiple people without it being taxed and with the value of your estate immediately dropping for inheritance tax purposes.

Alternatively, there is no limit on the number of small gifts, valued under £250 per person, that can be given per year. People can give away income regularly if they have more than they need to support their current expenditure.

She added: “For most gifts beyond these allowances, there is a seven-year rule to keep in mind. This means that the amount of your gifts will still be considered as part of your estate for seven years after you make them; gifts given seven years or more before you die will generally be exempt.

“Alternatively, you can choose to make donations to charities. These can be made either in your Will or while you’re alive, and all donations are exempt entirely from inheritance tax.”

5. Care costs

People are living longer, so considering the increasing costs of long-term care and healthcare is critical – no matter how far off or unnecessary that might feel right now.

‌abrdn research showed that around two-fifths (41 percent) have not planned to hold money back for later-in-life care costs. With retirement potentially lasting 30 years or more, it is vital that people are fully aware of how they are going to make their money last.

People often think that they will have higher income needs at the beginning when they are fit and healthy and then over time this will reduce, but trusting this assumption runs the risk of exhausting a retirement pot too soon. More often, expenditure starts high, then drops and then increases again in later life.

Although most would prefer not to think about it, it is important to prepare financially.

Ms Lowe encouraged Britons to Seek help with retirement planning to map out what they’ll need at every step of the way. This can make what is perceived to be a complex and emotive process “much easier to manage”.


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