Can I afford to retire?
Retirement is one of life’s big events and you need to make sure you have enough income from other sources before deciding to reduce income from work.
Cogent has developed a retirement income planning service to help guide clients into and through retirement.
The service can provide peace of mind. It can also provide focus, if more work is required to fund your planned retirement lifestyle.
This interactive planning session allows you to build “what if” scenarios. For example:
- What income can I plan to have if I retire earlier or later?
- What income do I need from my pension if I reduce my salary/working hours?
- How much does my retirement income reduce if I take a lump sum from my pension to give to my children?
The first step is to develop your retirement budget.
This would cover your essential living costs and can make provision for higher cost items (eg, car replacement, holidays, home improvements).
As prices tend to rise over time, a retirement budget must factor in inflation to protect your standard of living.
The next step is to review your retirement income sources to include State Pension, Personal Pension(s) and Final Salary Pension(s). It might also include savings, investments or rental property.
It’s worth remembering that most of your retirement income (including your State Pension) is taxable so this will affect how much money you actually receive.
As people are now living longer, understanding how long your retirement savings need to last is a critical consideration in retirement planning.
Once the budget is built, inputs to the model can be changed to assess the impact on the retirement plan.
For example, the model can be adapted to show how your income could increase/decrease in retirement if your pension pot grows/shrinks.
It can also be adapted to show what happens if you retire earlier or later.
Importantly, it can also show what could happen to the buying power of your retirement savings if price inflation increases.