The five-year countdown: five steps to get ready for retirement

retirement, pension, retire, retired, 5 year countdown

The five-year countdown: five steps to get ready for retirement

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5 minute read

Many people spend most of their working lives looking forward to retirement. The blissful day when you hang up your boots and embrace freedom. Retirement shines like a beacon drawing you on through the journey of life. The promise of a happy retirement where you can enjoy your new-found freedom. Don’t view retiring from the workplace as an end (the original French retirer, to pull back or withdraw). View it as a new and fresh beginning.

However, retirement is a moment of profound change, not least when it comes to money. Success depends on having a financial plan in place to replace a salary or self-employment. It's a matter of carefully negotiating the complex worlds of investment, taxation, and inheritance tax planning.

Retirement isn’t a case of downing tools and walking off into the sunset. It requires careful thought, preparation, and specialist help.

Outlined below are five key steps to inform your journey through the retirement countdown.

1.    Make sure you are ready to retire

The first step is to ask yourself if you are ready to retire. There are many factors to consider. Your financial affairs is the big factor to begin with. Your ability to afford retirement depends on lifestyle, your family situation, and home ownership. If you have dependent children, or have 15 years left on your mortgage, the time might not be quite right.

You have to ensure retirement is the right move for you. Work can be stressful, but it can be rewarding and give you a sense of achievement. People may miss the routine of working life, and the day-to-day interaction with people.

What you need might not be retirement, it could be change. A chance to get out from behind your desk to do something meaningful. Perhaps retirement is your ticket to achieving this. Taking a different path where money is no longer the prime motivation.

If you are afraid about having time on your hands after retirement, explore options for filling it well before you take the leap.

2.  Decide on your financial priorities in retirement

Retirement means a major change in lifestyle. You need a clear mind of what you want your life to look like and how to spend your time. Then you can work on arranging your finances to suit.

Decide on your priorities for retired life. Do you want to travel, or split your time between home and somewhere hot and exotic? Is there a particular hobby you want to immerse yourself in? What kind of leisure and social activities matter to you?

Try not to get caught up in what happens right after you end work - also consider the later years in your retirement. Will long-term travel continue to be feasible as you get older? Will you need such a large house, or will it become a burden?  And what about in the latter stages of life, should you need to fund care?

3.  Get to grips with your potential income in retirement

You must have a clear picture of what kind of life you would like to lead in retirement and what it will cost. Then you can start to dig a little deeper into what you might be able to afford. This means getting to grips with your sources of income once your earnings stop.

Your first port of call is your pension - or pensions. Contact previous pension trustees to request up-to-date forecasts. If you’ve lost details of a pension scheme and need help, the Pension Tracing Service (0800 731 0193) may be able to help.

You should also find out what your likely state pension entitlement would be - you can do this by completing a BR19 form or by visiting www.direct.gov.uk.

If you have personal pensions, you need to find out where they are invested, how they have performed, and what charges you are paying. Also check if there are any valuable guarantees built into the contracts. It may make sense to consolidate existing pensions, making it easier for you to keep track of everything and reduce the amount of correspondence you receive.

If you have a financial adviser, they should have all the details to hand. It makes sense to get their help and input early on.

With investments in general, it is important to review your strategy before you take the leap into retirement. You don’t need to suddenly become an ultra-conservative investor – you still want your portfolio to grow over the next few decades. Should the investment markets take a big hit, you may want to limit your downside. Don’t forget, there may be another 30 years ahead.

If your investments don’t look on course to give you the income you’d hoped for in retirement, don’t put off confronting the truth. You may need to revise your projected living costs and make some sacrifices. Alternatively, there’s still time to change your investments and you can also cut back on spending while you are still earning to generate more savings.

A qualified financial adviser who specialises in retirement planning can help you sort all of this out.

4.  Make the most of your salary

Your income can be used in other ways besides topping up your savings as you prepare for retirement. Clearing debts, including your mortgage, should be a priority before you retire. Whatever you owe on credit cards and loans, focus on paying off the debt that charges the most interest first. Debt will be the biggest burden once you do not have a regular working income.

Having no mortgage to pay is a major step towards re-adjusting your finances for a post-salary life. You might also decide you want to sell up, whether to downsize, to give you a lump sum of cash to live off, or to fund your dreams of moving abroad. Either way, use your working income while you can to improve your home, maximising potential revenue when you come to sell it.

5. Start to adjust financially

Finally, retirement is a huge change, both personally and financially - so big it might be too much to take in all at once. It makes good sense to practice at being retired before it becomes a reality, especially if you will have to make certain adjustments and sacrifices to compensate for a reduced income. You might even consider a phased retirement, cutting back on your hours gradually. This will not only soften the financial effect, it will also get you used to having more spare time to fill.


Overall, the message for your retirement countdown is: be prepared. The steps are not intended to be taken in sequential order. For example, once you have dug deep into what your potential income in retirement is likely to be, you might have to go back and re-adjust your priorities. Or it may prompt you to decide that now is not the right time for you after all.

A good time to start doing your planning is about five years before you aim to stop.

Five years is just a guide - if you are struck with the sudden conviction that now is your time, all of the above could be completed in 12 months. Alternatively, you might choose to spend 10 years getting everything just so and ensuring your have the financial security to live the post-work lifestyle of your dreams.

Like an aeroplane on the glide path to the runway, the key is to put in the preparation to get the retirement you deserve.

It is natural to feel out of your depth when it comes to financially preparing and planning for retirement. It is something people are rarely taught and something you will usually only ever do once. Discover how you may benefit from a retirement coach, in our blog: Why you need a retirement coach to help you avoid serious mistakes.  

To get a review or a second opinion to ensure that you don’t have a bumpy landing, contact us today.  Alternatively, you can find out how we help people preparing to retire, like you, on this page: Financial Planning For Retiree. 

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