Your financial plan for your fifties and sixties
If you’re in your 50s, you might be thinking about when you’d like to retire. The more information you can gather at this stage, the more likely you are to be in a strong position when it comes to evaluating your retirement plan and considering how to best use your savings in the future.
Topping up It’s not too late to top up your pension and, while you’re still working, it’s important to maximise your employer contributions, where available.
Reduce debt Pressure on your finances might have diminished over the years and your earnings are probably at the highest they’ve ever been. Any extra disposable income you have could now be used to pay off any outstanding debts and catch up on your pension contributions.
Tips at 50
- Set retirement goals - Our Retirement Planner will help you compare what you currently spend to what you plan to spend at retirement.
- Maximise your workplace pension contributions, get a State Pension forecast and fill in any gaps to maximise your entitlement.
- Pay off any debt.
- Consider consolidating multiple pensions. If you think you’ve ‘lost’ any pension pots, you can use the government’s tracing service to find them.
- Review how your pension pot is invested with the help of an adviser.
Of course, if you’re financially secure, you can choose to retire and take your pension in your 50s once you’ve reached age 55.
Before you decide to consolidate your pensions, check you won’t lose any valuable features such as protections, guarantees, or other benefits should you transfer. If you’re not sure, you should get financial advice – there may be a charge for this.
You also get free and impartial government guidance about your defined contribution pension options. You can visit them at Pensionwise.gov.uk or call 0800 138 3944.
It’s time for you to start actively planning your retirement and work out when you can afford to retire.
Retire fully, or phase in retirement?
You can continue to pay into your pension and get tax relief on your personal contributions until you reach age 75. If you continue to work, employers have to continue to pay pension contributions on your behalf until your state pension age. If you work past this age, your employer may continue to contribute.
If you need to start accessing your pension to top up your income, it’s important that you seek advice. You can take up to 25% of your pension as a tax-free lump sum, the remainder is taxed as income. Try to avoid taking too much as this might push you into a higher taxable income band. In certain circumstances, depending on which type of benefits you choose to take, the ability to pay future pension contributions without occurring a tax charge would reduce from £40,000 to £4,000 a year.
The value of any tax relief depends on your individual circumstances.
You may have received information from the Government about your State Pension and you may want to consider delaying to claim it beyond your State Pension Age. The State Pension is increased by 1% for every nine weeks you defer, or by 5.8% for a full year. This means that if you’re entitled to the current full annual State Pension of £8,296.60 you’ll get an extra £479 a year. For more information, please visit 'Delay (defer) your State Pension'.
Tips at 60
- Consider supplementing your pension income with part-time work or phased retirement.
- Consider downsizing your home.
- Check that all your debts, including your mortgage, are in order and on the best rates.
- Get a State Pension forecast and think about delaying your State Pension. Check your State Pension here.
- Decide how and when you want to take your pension and create a retirement strategy with the help of a financial adviser.
The value of an investment can fall as well as rise and isn’t guaranteed. You could get back less than you invest. This article is based on our understanding of the current and historical position of the market(s) and shouldn’t be interpreted as recommendations or advice.
Information correct as at November 2017.