“Retirement is a different lifestyle”, financial expert Pete Matthew explained. During The Meaningful Money podcast, he discussed practical elements people can take when preparing for retirement. People need to prepare for the unexpected and work out where their money is coming from and how much this will be.
There are many things to consider such as what will happen if someone dies before their spouse – for instance how they would provide for them, and whether their death would have impact the amount of pension their loved one gets.
The first thing Mr Matthew suggested people should do is work out how much they will be getting, and what format this will come in.
He said: “Does it allow for a spouse, is it going to be indexed and increasing or not. It’s really important that you know, that’s the baseline.”
“We call that secured income, stuff you know is going to come in. Know when it’s going to come in, how old you will be when they come in.
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The most obvious form of income he mentioned was the state pension.
As the dates people will receive this are changing, it’s important to know when to expect it.
He explained that he will receive this when he turns 67, so for those who may be the same but thought it was 66, the 12-month period is a lot to cover if they have not planned for other income during this time.
Another thing that people should do is be conscious of their spending – and plan what they purchase out.
People should be aware of how much they spend on food, council tax, heating and electricity.
He explained that this would be different for everyone as those in different areas may need a car, whereas others can take transport.
People with family abroad may need to budget to go and see them once a year, whereas others do not need to.
Mr Matthew continued: “Assume high because most people underestimate.
“The easiest way is to write it down. You should track your costs before you retire so you won’t be guessing at that point in time”.
“You will have a bit of splash when you first retire so allow for the fact that you will spend more initially,” he said.
Lastly, people need to know what they have invested.
When people know where their guaranteed income is coming from, and what they will be spending their money on, there is “likely to be a gap” and this should be filled.
He explained that the “dangerous zone” is when people start spending more, despite not getting the same income from work.
He said: “Get it all together, know exactly what you’ve got and how it is invested.
“Also, know whether your existing pension plans allow for flexibility. People should know this before they retire.”