Retirement planning begins with asking and exploring what kind of lifestyle you want to live, how you wish to spend your retirement day, and what goals you want to achieve during your retirement day.
Then you might as well match it with the strategy and timing; how much time you have to meet them; and finally, you should explore the various types of retirement savings that can help you raise your budget to fund your future.
One of the most difficult aspects of developing a comprehensive retirement plan is balancing realistic return expectations with a desired standard of living. The best solution is to concentrate on developing a flexible portfolio that can be updated on a regular basis to reflect changing market conditions and retirement goals.
There are numerous options for funding your retirement. It’s a good idea to start thinking about your retirement options and the decisions you’ll have to make as soon as possible before you leave the office, and start appreciating your retirement mornings. Now is the time to think about how you’ll get the most out of your retirement years and how much money it will cost.
Important Considerations Before Retirement
As you begin to plan your retirement, it is critical to consider some key factors that will determine your retirement goal. We recommend that you consider;
What is your plan? Some people want to spend their retirement doing something they couldn’t do while working, such as starting a business, while others want to spend their time with family.
What Are Your Plans for Your Family? For many people, starting a family is a major life goal, but having children can deplete your savings quickly. As a result, the type of family you hope to have will influence your retirement planning.
Aside from yourself and your family, you must also determine your residency. While travelling during retirement can be an exciting adventure, extensive travel will deplete your retirement savings faster than staying at home. Moving to a country with an extremely low cost of living, on the other hand, may allow you to stretch your savings while maintaining a high standard of living.
One of the most important factors that affect you before retiring is the different types of tax-advantaged retirement accounts. Each country has its tax policy, as well as its own set of living expenses. While living in the UK may be safe in terms of taxation, living outside the UK may put you in an uncertain situation in terms of taxation.
While retirement planning may be confusing for some, we provide you with a checklist to fill out in order to begin planning your retirement.
Plan Your Timing – When Should I Retire?
In general, there is no set retirement age, but if you believe 30 is the ideal age, then it is. However, the best time to retire will be determined by the pension assets or other assets on which you will rely during your retirement. Some clients want to retire as soon as possible so that they can spend time with their family, and children, or pursue other interests. Others would like to work in their retirement, possibly taking on contract work until they are 60-65, or even 75.
However, in terms of the pension age in the UK, the government has set a normal retirement age (NRA). Under the Pensions Act 2007, the State Pension age for men and women will increase from 67 to 68 between 2044 and 2046. The Pensions Act 2014 provides for a regular review of the state pension age, at least once every five years.
What exactly does it all mean? At a certain age, you can withdraw from all of your pension schemes, including the state pension, workplace pension, and personal pension schemes. While you will be exempt from taxation on contributions and asset growth within your scheme, you will be taxed on distributions. Please keep in mind that each pension scheme imposes a different type of tax on the distribution. You may begin to read our article to comprehend each scheme.
Your current age and expected retirement age lay the groundwork for a successful retirement plan. The greater the time elapsed between now and the pension plan, the greater the level of risk that your portfolio can withstand.
Evaluate Your Retirement Income
As you approach retirement, it’s a good idea to double-check that where your pension funds are invested best meets your needs. A pension is a type of cash payment for retirement which allows one to live comfortably when no longer working.
There are income streams available to you for retirement. If you are still working, you will have two types of pension schemes: the state pension and the defined benefit or defined contribution scheme. No matter which type of pension scheme you choose, it is important to make sure that you know how the pension scheme has been invested.
The State Pension
The state pension is a regular payment made by the UK government to support individuals in the UK in meeting their basic needs. Following the Old-Age Act in 1908, the government implemented the State Pension, which is widely considered one of the primary pillars of the modern welfare state. The goal was to offer a lifetime weekly payout to people in their retirement years after they had completed their employment.
When you reach the state pension age (SPA), most people will be eligible to receive a weekly payout from the government. The state pension age is currently 66 and will rise to 67 in 2028 and is projected to climb to 68 between 2044 and 2046, depending on your birth year.
The Final Salary Pension Scheme
If you have a defined benefit pension, it will typically begin paying you a guaranteed income as soon as you reach the scheme’s normal retirement age. This is usually 60 or 65, but check with your plan. The amount you receive is determined by your salary and the length of time you have worked for your company. A lump sum may be paid in addition to your pension, or you may be required to forego some income in order to receive a lump sum.
The Defined Contribution Scheme
If you have a defined contribution pension, you will have accumulated a pot of money that you can normally begin withdrawing at the age of 55. You can use the money in your pension in a variety of ways to provide income or lump sums in retirement. Different options can generate varying amounts of income.
In addition to your pension scheme, you can evaluate your alternative retirement investments, such as:
Individual Savings Accounts (ISAs)
Individual savings accounts (ISAs) are one of the most popular savings vehicles in the United Kingdom. An ISA is exempt from capital gains tax (CGT) and does not pay tax on dividends or interest. ISAs also benefit from a high degree of flexibility.
There are numerous types of ISA that can play a part in retirement planning:
- Stocks and shares ISA
- Cash ISA
- Innovative finance ISA (IFISA)
- Lifetime ISA
- Flexible ISAs.
- Junior ISAs (JISAs).
You can also put your money into eligible investments, such as:
- Shares that are officially listed on a recognised stock exchange anywhere in the world or admitted to trading on a recognised stock exchange in the European Economic Area (EEA).
- Officially listed corporate bonds.
- Gilts (including strips) issued by EEA governments.
- UK-authorised unit trusts and UCITS, qualifying non-UCITS retail schemes.
- UK-listed investment trusts, including REITs.
- Shares acquired from an all-employee Save As You Earn (SAYE) scheme or share incentive plan.
- Life assurance policies, as long as they are single life.
- Stakeholder medium-term investment products.
- Cash and deposits
Talk To Your Financial Advisor.
You need to also understand that no matter how much research you do or how much due diligence you perform, you will never fully understand a financial plan better than your financial advisor. At times, you’ll discover that a financial advisor makes very different choices than you would.
A financial advisor examines your income, future goals, purpose, and market conditions. As a result, they assist you in selecting the appropriate investment options and products based on your risk and return requirements. Following the completion of these investments, they will assist you in monitoring the performance of your investment portfolio.
Cameron James, Expat Financial Planning -Your Trustworthy Pension Transfer Specialist.
Cameron James Expat Financial Planning is the preferred independent financial adviser for final salary pension and SIPP transfers. With over ten years of experience transferring pensions, Cameron James is now servicing clients in 26 countries.
We have the qualifications and technical knowledge required to help you transfer to an international SIPP as an expat and a US resident. Our mission is to bring regulated and transparent advice to our clients. As such, our clients know how much their advice will cost in advance, with no hidden fees.
Cameron James Expat Financial Planning has a sophisticated cash flow management system in place. Our senior management team has a decade of experience in serving expats and is committed to serving the requirements of expats for decades to come.
Transferring a DB or DC pension into a SIPP plan for expats is not a simple decision. Before deciding, many details and procedures must be thoroughly understood. Without this knowledge, the benefit will turn into a potential loss.
It is essential to seek competent advice from a qualified financial adviser to verify that your profile matches the suitable options and to ensure that your choice meets the UK and US regulations. Meet one of our dedicated advisers to get a full understanding of SIPPs.