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Your Money: How do you know if you can retire?

Can you afford to retire and enjoy the lifestyle you want?
Can you afford to retire and enjoy the lifestyle you want?

As we emerge from the pandemic many people are considering their working arrangements, employment status and what their financial future may hold.

Indeed many in the later stages of their careers are contemplating stepping back from work after a few years of uncertainty.

But how do these people know if they are in a financial position to do so?

Planning for retirement has never been as important as it is today.

Longevity, high levels of inflation and changing lifestyles mean there is a requirement for careful planning for life after work, regardless of what stage of life you are at.

A lifetime financial model is necessary to establish your current position and what lies ahead.

Robust analysis of your capital, sources of income and planned expenditure is an ideal starting point for establishing if it is financially possible to reduce or stop work completely.

pension contributions

What does it cost to run the house in terms of utilities, council tax etc.? What other living costs need to be met – such as food, clothing, socialising etc?

How often are holidays taken and how much will these cost? How often does the car get changed and at what cost? Are there any plans to support family?

Once these figures have been established, financial planning software can be used to model what lies ahead, using various agreed assumptions.

Review, review, review

This model should be reviewed on a regular, annual basis to make sure it remains as accurate as possible and is relevant to you.

Existing pension funds and other assets can be stress-tested to find out if they are adequate to meet all planned expenses for the rest of your life.

By managing a pension fund wisely, as well as risks and expectations, you can create a greater probability of a successful outcome if you withdraw money from your pension.

Evan Duffus, Acumen Financial Planning.

Extracting the entire pension pot may be tempting, but the taxman will, ultimately, be the winner in that scenario.

Large unnecessary withdrawals can result in income tax charges. Taxation can be reduced or avoided altogether if withdrawals are managed to a level that meet your expenses rather than unnecessary spending habits.

Excessive withdrawals will result in the pension pot being exhausted early.

Longevity, high levels of inflation and changing lifestyles mean there is a requirement for careful planning for life after work, regardless of what stage of life you are at.”

Revising your planning model on a regular basis will ensure all expenses are accounted for and help you work out how long your pension fund will last.

Investment returns within the pension pot will also determine the sustainability of withdrawals.


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It is vital to establish a suitable portfolio and have an adequate percentage of the fund in defensive assets that can safely meet withdrawals, regardless of the current state of financial markets.

There is enough uncertainty in the world. Engaging the help of a trusted financial advisor, establishing a plan and reviewing it on a regular, annual basis is the key to successful outcomes. Doing so will provide clarity as to what lies ahead financially.

Evan Duffus is a chartered financial planner at Aberdeenshire-based Acumen Financial Planning.

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