5 key questions to ask yourself if you’re planning to retire in 2024

14th December 2023

As we enter the final few weeks of 2023, you may now be looking towards the year ahead and setting goals and resolutions.

For many, one treasured goal may be to retire in 2024 – and with this milestone comes excitement, anticipation, and perhaps feeling a little overwhelmed too.

A helpful way to begin preparing for your retirement, especially if it is set to happen in the next 12 months, is to ask yourself a set of questions about where you’re up to with your plans. If you’re unsure of the answers, you then have time to seek guidance and prepare your finances for this next chapter of your life.

Indeed, as reported by a recent Just Group study, 49% of people enter retirement without any clear later-life plan – but this “retirement blind spot” could leave you vulnerable to running out of funds later on.

So, as the new year appears on the horizon, here are five important questions to ask yourself if you plan to retire in 2024.

  1. What will be my top 3 priorities when I retire?

Much like many major life events, individuals often anticipate the day of their retirement without thinking much about what will happen afterwards. But as this momentous occasion draws closer, it’s crucial to begin thinking about what you want to do when you get there.

Your later-life priorities are personal to you, but to get the ball rolling, here are a few we often hear about from our clients:

  • Travelling
  • Focusing on health and wellbeing
  • Supporting the next generation
  • Starting new hobbies
  • Volunteering with a charity.

Asking this question first could help to shape the more technical financial aspects of your retirement.

Knowing what your top goals are for this period in your life may allow you to forge a financial path that works for you and your family – something we’ll discuss in the next four steps.

  1. How am I going to draw my defined contribution pension?

One of the most important questions our clients ask us about is: “What is the best way to draw my pension?”

In truth, the answer to this is unique to your circumstances. There is no one-size-fits-all approach to drawing from a defined contribution (DC) pension pot, which may include workplace pensions and self-invested personal pensions (SIPP).

The most important thing to remember is that preparation is your friend here – so if you’ve not thought about drawdown options yet, it may be wise to begin discussing your choices with a professional.

Typically, there are three main ways to take your DC pension:

  • Buying an annuity
  • Drawing the whole pot as a lump sum
  • Going into flexi-access drawdown.

Remember: each time you draw from your pension, you can usually take 25% as a tax-free lump sum. If you are using flexi-access drawdown this doesn’t have to be taken all at once.

If you’re unsure which of these might work best for you, talking these choices through with a Financial Planner may help you form a plan before you come to retire.

  1. What will my annual retirement income be?

Once you have decided what your priorities are, and how you’ll draw the money you need to fund them, a useful next step could be to review how much your income you will need in retirement.

This is perhaps the most pressing factor to explore in the run-up to the end of your career. Knowing how much you have to live on means you have the opportunity to draw a sustainable income from the outset with the confidence that your money can last.

Figuring out how much you can afford to draw as an annual retirement income can be a challenging task to tackle alone.

Fortunately, working with a Financial Planner can make this a lot more efficient, as we can use cashflow modelling software to project your potential retirement income.

With our guidance behind you, you may approach retirement with a feeling of excitement, rather than worrying about how long your money will last.

  1. What tax can I expect to pay in retirement?

Tax is often an overlooked aspect of retirement, but in fact, it can pay to be aware of your potential circumstances as early as possible.

Remember: perhaps unlike your career, you may well be drawing income from several sources at once when you retire. These sources may include:

  • The State Pension, which is set to rise to a maximum of £11,541.90 a year in April 2024
  • Your DC pension pot
  • Any defined benefit (DB) pension schemes you’re a part of
  • Individual Savings Accounts (ISAs) you hold
  • Cash savings
  • Income from non-ISA shares, and other assets including property.

Without paying close attention to how much you’re taking each year, you could inadvertently increase your tax bill in retirement.

With all this to consider, it may be helpful to start reviewing how much tax you think you’ll pay when you retire.

  1. Have I talked through my plans with a professional?

Whilst many people “DIY” their retirement plans, the way you handle your finances in retirement can have a big impact on your quality of life, stress levels, and of course, the inheritance you leave later on.

Meanwhile, discussing your plans with a Financial Planner may make all the difference to your peace of mind. We understand that everyone’s goals are unique, and our experienced team will approach your retirement plan with your needs at the heart of the conversation.

If you’re set to retire in 2024 and wish to learn more about anything you’ve read here, get in touch today. Email us at enquiries@pen-life.co.uk, or call 01904 661140.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. All information is correct at the time of writing and is subject to change in the future.

All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate cashflow planning.

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.

Category: Retirement