Planning your pension to last longer

We are living longer! generally this is good new, but this means our savings need to last longer. No one would be surprised if you were to be hopelessly disgruntled after reaching your pension age. A plethora of unfavourable circumstances can make pension planning difficult. You need to contend with low interest rates pension qualification changes and poor returns on defensive investment classes. On the other hand, the government offers you a lot of control with the new pension rules. What you need to do is plan well and plan in advance so that your retired life is not inconvenienced, at least because of money, or rather the lack of it.

How long should your pension last?

What the experts are saying is that instead of planning to make your pension fund last longer, you should focus on planning till when you want your pension fund to last. The Office of National Statistics (ONS) says that an average man will live for 18.6 years after attaining the age of 65. This statistic for women is 21.1 years. This is interesting data and it shows you how to do your pension planning.

Pension pot options

Unlike before, you don’t need to put your pension pot into an annuity scheme, although this scheme is not a bad idea for people who have trouble managing their money. An annuity gives you an income for life, not a bad idea at all. However, if you have a certain lifestyle requirement, you should probably leave your pension in a drawdown because the returns are better. If you think you can manage liquid fund better, you can also cash out your pension. But then, there is a significant tax liability that comes with this kind of arrangement – something for you to ponder about.

Shares and mutual funds

For a higher growth in your pension fund, investing in stocks and mutual funds is a good idea. However, aggression should be curbed if you are planning this option. Instead of thinking about short-term yields, you should look at those stocks that offer a steady and long-term gain. The blue chip stocks are excellent in this regard because they grow over time and have handsome dividends coming your way, year after year. Even if blue chip stocks seem expensive initially, they are really excellent in the long run.

Split wealth with spouse

Another excellent option is split up to 85% of your super contributions with your spouse. This means you will split your salary and super guarantee. This arrangement will help you save significant costs. However, this option is only preferable if you are retired and your spouse is still working.

Managing costs

All this while, the talk has been about investing your pension money. However, keep in mind that there will be costs that you will need to bear without a pay check in your account every month. You should sit down and make note of all the expenses that would be coming your way – rent or any unpaid mortgage, living costs including costs for food and energy consumption and most importantly, care costs.

Get help

Don’t shy away from taking expert help if you are not sure how to plan for your pension fund. Not everyone is finance savvy, but the experts are and they can help.

Making your pension fund last longer entails a lot of careful planning. Spend time on planning and the outcome should be positive. Talk to the experts regarding the new pension plan that offers you more freedom to manage your pot.

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