How to survive a post-pandemic retirement
Have your well-thought-out retirement plans been scuppered by the pandemic? If you are a retiree who has suddenly found yourself in a very different situation to where you thought you would be after planning your retirement over many years, you may be feeling anxious about your retirement income and wondering whether you should take any action. Here, we consider some points:
Rather than a full retirement, many retirees in recent times have opted for a staggered retirement, which is where you continue to work part-time before giving up work completely. However, the pandemic has put extreme pressure on the job market, and you may now find yourself out of work and needing to draw income from other sources.
Previously, many wealth managers spoke of the ‘4% rule’ which has been considered to be a safe amount to draw from your pension pot without eroding your capital, however looking at financial forecasts, many experts now believe it would be more realistic to consider drawdown of under 3% in the current low interest environment.
Dividend income is down
Many retirees take ‘natural income’ from their pension pot, by just taking the dividends out as income and leaving the remaining pot untouched. The pandemic has resulted in a dramatic drop in dividends paid by UK companies, with the biggest quarterly fall on record in Q2 2020.
Is an annuity a short-term solution?
Although annuity rates, like interest rates, are very low currently, one option to consider is the security of a fixed-term annuity, which would provide a guaranteed income for a short period of time, as a part of your overall retirement strategy.
Lockdown may have focused your mind on what is really important to you during your retirement years and this could have changed your goals and objectives. It’s important to reassess what is essential spending and whether discretionary spending on things such as holidays and eating out is a priority – rethinking your budget could make for a more affordable, but just as enjoyable retirement.
Don’t act in haste
Pension freedoms have allowed much greater flexibility and you may be tempted to simply take more from your pension pot. This could be a short-term solution, but remember that your pension pot needs to last as long as you do, so take proper advice before taking any major decisions that could affect your longer-term plans and leave you short of funds in later life.
Financial advice is key
Recent months have seen an increased demand for professional financial advice. The right option will depend on your own circumstances to keep your plans on track, so you can enjoy the rest of your retirement.
Your Sandringham Advising Partner can review your options and tailor make plans specifically to your individual needs, so please do get in touch.
Sandringham Advising Partners is an award-winning independent financial advice firm offering cutting edge technology driven advice solutions, currently recognised by VouchedFor as their largest top-rated firm.