Do you remember the last time you reviewed your pension to check that it is on track to deliver when you retire? If the answer is no, you are not alone. You may have even set up a pension pot (or two) and not thought about it since. Again, you would not be the only one. It is easy to think that once the setup is done and your money is paid in regularly there is not much more to do. It is important to check in periodically, though. This month we look at why that is and how you can keep your pension goals on track. If you want a more detailed, individual look at your pension, talk to one of our independent financial advisers at any time at www.plutuswealth.com.
Why it is important to check your pension
We know that pensions are a long-term investment. We also know that market fluctuations happen and that over time they should iron out any short-term losses. Perhaps this is why it is easy to set up a pension pot and forget about it, as long as we continue to pay into it.
What we often forget, however, is that it is more than about what the markets are doing. Inflation, interest rates and cost of living are just some of the day-to-day factors that can have an impact on investments. Not to mention how lifestyles vary over time. Choices and preferences change, and earnings and expenditures could be quite different in your twenties compared to your fifties.
It is important, therefore, to check in on your pension from time to time. To verify that it is on track to deliver what you are expecting, or to make changes if it is not.
How to keep your pension goals on track
There are a few simple things you can do to ensure your pension is on track to deliver.
1. Know when you want to retire. Having a goal in mind will ensure you have something to work towards. It may be that you choose to gradually reduce your working hours first, in which case what you pay into your pension may also reduce. This could have an impact on the final amount available to you when you do fully retire. Knowing when you intend to stop working will help determine how much you need to save now in order to be able to retire when you choose to.
2. Calculate what you will need in retirement. Your day-to-day costs may be lower by the time you retire. For example, you may have paid off your mortgage or no longer have children at university. This would make how much you need to live on significantly less. However, you may also decide to travel more or wish to put money aside for potential future healthcare costs. Our article on how to make sure you have enough money to retire can help with these calculations. Having a clear idea of how much you need to live on in retirement will help focus on what your pension pot needs to provide.
3. Consider any other potential income streams. Pensions are not the only income stream available. Take into account any other investments, shares or rental property you may have in your calculations. Keep track of how they are doing as well and remember to update those calculations should you make any changes to them.
4. Review your pension annually. Your pension manager or independent financial adviser may send you an annual statement. Don’t ignore it. Review it to see how your funds are performing and talk to your adviser if you have any questions. You can also request a State Pension statement through the government’s website with just a couple of clicks. With your retirement date in mind, you can see how the numbers add up. If they don’t, you can take action to supplement your pension pot.
5. Consolidate your pensions. Few people work for only one employer nowadays. This means that you are more likely than not to have more than one pension pot. Unless they are all actively managed it could pay off to consolidate them into a single, managed pension instead. There are two benefits to this. First, it easier to keep track off a smaller number of pensions. Second, it also ensures that your pension(s) are managed and that decisions are made swiftly to swap out any funds that are underperforming.
6. Don’t keep putting it off. It is easy to think you have plenty of time ahead of you. And you might. But the sooner you start, the more control you have over your pension’s performance. Supplementing any predicted shortfall is easier when you can take greater risks, which is easier to do when you have more time.
Involve the experts
Keeping your pension goals on track is easier when you have experts to help you. Seeking advice from an independent financial adviser is a wise choice and one which can set you up for retirement success. Our Plutus Wealth team includes experienced pension experts who can help no matter where you are on your pension journey. Get in touch with us for advice tailored to your needs and lifestyle choices and we will work to make your retirement comfortable and enjoyable. Call us on 020 7871 5200 or drop us a line at email@example.com to get started.