5 tips if you’re planning to retire in 2021

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Many people use the new year as an opportunity to review their financial situation and plan for the year ahead.

If you’re approaching retirement, you may be wondering whether it’s still viable in the wake of the economic disruption caused by the coronavirus pandemic. So, if you’re planning to retire in 2021 but aren’t sure if you’re ready to, here are five tips to help give you peace of mind about your retirement.

1. Make a plan

When you’re approaching retirement, one of the biggest questions to answer is: what do you want from your retirement? After many years of hard work, it’s time to start thinking about how you want to enjoy this phase of your life.

Deciding what you want from your retirement is an important issue to consider as it will affect all other areas of planning.

You might want to use your retirement to live out big goals, such as seeing the world or learning new skills. Alternatively, you may prefer a more quiet and peaceful retirement that might include spending more time with your family.

There is no correct answer to this question, only the right one for you. Consider sitting down with your spouse or partner to make a list of all the things you want to do when you retire.

2. Make sure that you have the income to support your preferred lifestyle

If you want to enjoy the lifestyle you want in retirement, you’ll need the income to support it. This income is likely to come from several sources and a large portion of this will probably be from pensions. These may include:

  • The State Pension
  • Private pensions
  • Superannuation
  • Workplace pensions

You may also have other investments which provide an income, such as:

  • ISAs (Individual Savings Accounts)
  • Shares and bonds (both onshore and offshore)
  • Buy to Let property

If you have assets in both Australia and the UK, you also have choices about where to draw your income from to ensure you’re doing it in the most tax-efficient way. The country you decide to retire in will also have an impact on how you structure your retirement income.

As each country’s taxation and superannuation rules are different, it is important to work with an adviser with knowledge of both countries. This ensures you receive comprehensive and precise advice.

3. Decide whether you need to repay your mortgage before retiring

In the past, it was generally accepted that you should pay off your mortgage before retiring, as this helped to free up additional income and gave you one less thing to worry about.

While that can still be good advice, it isn’t a hard and fast rule anymore. Due to low interest rates and the flexibility of both the UK and Australian pension rules, it is quite possible for you to retire even if you still have debt.

The question you need to ask yourself is: does paying off my mortgage help me to achieve my retirement goals?

If you have debts, such as a mortgage, and are concerned that they will impact your preferred lifestyle in retirement, you may benefit from seeking financial advice.

Working with a financial planner can help you to make informed decisions about whether you need to pay off your debt before retiring.

4. Consider moving assets to the UK

If you’re planning to retire in the UK permanently, you may want to consider transferring your assets to the UK. As with most financial decisions, however, there are pros and cons to consider.

One of the biggest obstacles that you may run into is the complexity of UK tax laws. As an Australian national, you’ll be able to access your superannuation from the age of 60, provided that you meet the release conditions.

However, while taking income from Australian superannuation is tax-free for Australian tax residents, if you draw this income in the UK it may be liable for UK tax.

We’ve previously looked at how you can access your super in the UK but, when it comes to tax, making a mistake can be very costly. You may benefit from speaking to a financial planner who has experience working in both the UK and Australia.

5. Speak to a financial planner

If you want to make the most of your retirement, it’s important to manage your wealth in the most effective way that you can.

If you have pensions and other assets in the UK and Australia, it’s important to consider all the variables and create a tax-efficient growth and income plan. Minimising the tax paid early on in your retirement maximises your investment for longer.

At bdhSterling we have licences in both the UK and Australia for full financial planning and can help you develop a clear plan. Get in touch to find out how we can help.