Why aspirations should be placed at the centre of your retirement finances

When it comes to retiring, the focus is often on money. There’s no doubt that the income you will receive once you’ve given up work is an important factor for your retirement. But it shouldn’t be the sole focus of your plans. In fact, your aspirations should be placed at the centre.

There are many reasons for starting with your aspirations when you’re planning your ideal retirement, including:

Helping to achieve a fulfilling retirement

For many, retiring is something they’ve been looking forward to for a few years when the time comes. But that doesn’t mean it’s not fraught with challenges. Work plays a big part in our lives and identity, it can be difficult to find a new purpose and achieve fulfilment once you’ve given up your career.

If you’re just focusing on your retirement finances, it can be easy for opportunities to pass you by. Taking the time to think about how you’ll fill your days in retirement can help you to set out a path that’s more fulfilling and ultimately lead to a more enjoyable retirement. A retirement plan that only looks at the income you can expect to receive can mean that the next chapter of your life, which promised much, falls short of your expectations.

Reflecting your priorities

When you think about your ideal retirement, what will your priorities be? What you want to be your focus can be very different from those around you, even when they’re celebrating the same milestone. Having your overall priorities in mind as you approach retirement, and considering these before finances, can help set you on the right path.

A retirement that prioritises spending more time with family, for instance, will need a very different approach and funding to one that focuses on travelling the world. By making this a core part of your retirement planning, you’re in a better position to achieve your aims and really think about what you want your retirement to look like.

Calculating differing income needs

Without a plan for what you want to achieve in retirement, it’s impossible to calculate how much income you need to generate from your pension savings. With more options than ever before when it comes to withdrawing from a pension, your aspirations should dictate how and when you withdraw money from your pension.

For those that want security and a lifestyle that requires a stable income, purchasing an Annuity may be the best option. However, for others, using Flex-Access Drawdown to cover periods where a higher income is needed before reducing the income again can be more efficient. Putting your aspirations at the centre of the planning process can help you get the most out of your money.

How does your retirement income match your aspirations?

Of course, with that being said, retirement income is still crucial. After all, it will affect whether you can achieve your dream retirement or need to make compromises at some points.

This is where financial planning can help. It helps you to align your aspirations with your finances to create a plan for a realistic, fulfilling life. By starting with your aspirations, you’re able to see how your different financial options will affect what you’re able to achieve.

Since Pension Freedoms were introduced in 2015, retirees have had a multitude of options for how and when they take their income. Which route is right for you and proves most efficient will be influenced in some way by the retirement lifestyle you want to achieve. Cashflow modelling can help give you a visual representation of this.

For example, you’ll usually be able to access your pension from the age of 55 but what level of income would this leave you with? If you delayed retiring by a few years, could you then achieve your desired income? Could you, in fact, afford to retire earlier than expected if you’re ready to leave the world of work behind you?

Retiring is a big decision and there are likely to be a few concerns, including those related to money. Effective financial advice and the use of cashflow planning can give you the confidence to make plans knowing that your financial security has been considered. It can help give you the freedom to focus on fully enjoying your retirement years, whether you’re keen to spend more time with grandchildren or focus on a hobby that was neglected when working.

If you’re planning your retirement and could benefit from expert support, please contact us. We’re here to help you balance both sides of the retirement planning process.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.