Introduction
There is a lot to do when it comes to refining your retirement vision, and it's important to take it slowly and look at all aspects. Here, we'll address the first two steps.
Cost it Out
It's time to start writing things down. Depending on how you manage your finances currently, you may have a greater or lesser amount of clarity about what you are spending every month. I know you are not retired yet, but your general household running costs won't change much when you are, so you should be able to identify a fairly accurate required expenditure level.
After that we are in the realms of costing out luxuries and then occasional costs like changing the car every five years. This is going to be less exact but if you take holidays now this will be your guide. Ask yourself when you retire, will you buy and run the same kind of car as you do now? If so, then the cost should be fairly clear.
The aim is to pin down a likely required and desired lifestyle cost for the early years of your retirement. Put a figure on this and then maybe add a margin of error – 10 or 20%, depending on how accurate you have been.
If you are a wet finger in the air type of person, now is the time to get a little bit more granular than might be immediately comfortable, but this is important so don’t skip it. Don’t round to the nearest £5,000 per year of expenditure; try and be accurate to the nearest £500 per year if you can.
Establish Income Sources
Once you have your expenditure written down you need to turn your attention to sources of income. We're going to start with secured sources of income, beginning with your state pension. If you haven't already, you should get state pension forecasts for you and your partner.
Then we need to establish any other secured pension benefits, such as those from old defined benefit schemes. If you are a current member of such a scheme you will need to dig out your most recent annual statement.
You should still get these even if you are a deferred member of a DB scheme, but it can be easy to lose track. If you have moved house and not informed your scheme of your new address, then you won't be getting statements.
Take the time to think back over your career. Try to build a timeline of who you worked for and when. Did you have a pension at each of those employments? If so, do you still have a record of those plans? Are those records up-to-date?
If not, then now is the time to reach out to those companies and try to track your pension provisions. Use the governments’ pensions tracing service if you don't have contact details. If you have any more things like deferred annuities or widow’s pensions, then note these down too.
OK, let's look at what else you need to do to refine your vision.
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