Retirement may mark the end of your working life, but it’s probably the time at which your money has to begin working it’s hardest. Making the most of your money and planning ahead can be key to securing the life you want to lead throughout your retirement. We’ve highlighted some key areas to help you get the most from your money and enjoy your retirement.

TAX

Many retired people discover that they continue to pay substantial amounts of tax after their working life ends, as they still have to pay tax on earned and unearned income, such as pensions and savings interest. Tax planning is as important in retirement as it is during working. Make sure you make the most of your tax allowances – ISAs are a great tax efficient way of investing up to ?10,200 a year.
 

PENSIONS

Even if you’re retired, you can still contribute to a personal pension up until age 75. On contributions of up to ?3,600 gross you will receive basic rate tax relief. This means that to invest ?3,600 you will only have to pay ?2,808, the government pays the rest. Then at any time before age 75, you should be able to take up to 25% of your investment as a tax free lump sum and the rest as a regular income (normally via an annuity).

ANNUITIES

Most pensioners hand over their pension pots to life insurance companies to buy an annuity. But remember, you do NOT have to buy an annuity from the pension company which you (or your employer) have saved. It is absolutely essential to shop around for the highest annuity income that you can buy as it could result in you getting an income up to 30% higher for the rest of your life. Hargreaves Lansdown’s free annuity service can do all the hard work for you by searching the market in minutes.


HOME, SWEET HOME?

Many retired people choose to buy a second home in order to enjoy the benefits of a new region or country. Before you go down this route, it’s important to consider all the costs. As well as the upfront expenses which can amount to between 5% and 10% of the purchase price, you need to budget for the ongoing costs such as repairs, insurance, local taxes, and energy bills. If you’re buying abroad make sure you shop around for the best exchange rate. On such high amounts of money, even the smallest of changes could save you ?000’s.

PROTECT YOUR CASH FROM THE EFFECTS OF TIME

A man currently aged 65 can expect to live to 81; for women of a similar age, life expectancy is now 85. Thus, inflation has plenty of time to damage your retirement income. It makes sense to invest a proportion of your capital in investments which seek to provide growth which will outpace inflation over time. It’s also a smart move to keep a generous sum in cash, in order to allow for unforeseen events and major purchases, but make sure you’re getting the best rate you can. An account that was competitive when you opened it may not still be the best available today – check it regularly.

INHERITANCE TAX

It’s not the cheeriest of subjects, but planning ahead for Inheritance Tax can make sure the tax man doesn’t get more money than your family when you’re gone. Use your annual exemptions – every tax year you can gift up to ?3,000. In addition, you can gift any of the allowance you didn’t use in the previous tax year. There are a number of other allowances available, make sure you are making the most of them.

Content from “The Pocket Guide to Surviving Retirement” by leading pensions and investment broker Hargreaves Lansdown. Request you FREE copy now…

 

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