WILL THE COST OF LIVING CHANGE YOUR RETIREMENT PLANS? PHASED RETIREMENT WHY IS IT BECOMING POPULAR?
According to research one in three people will have to change their retirement plans because of the cost of living crisis, a survey held of over 2000 people aged 55 and over in June this year, and 1,000 who were planning to retire in the next five years found that just under 58 per cent would consider working in retirement, however although people are reconsidering options due to financial reasons, they may also be thinking about having a better work-life balance, seeking more autonomy.
Older workers should be appreciated and valued by their employers, especially if they are re-joining the work force, with a life time of valuable skills employers should relish this prospect and offer flexible working and balance for underused skills to encourage enthusiastic older workers, this will then place them in a better situation financially to eventually retire.
Millions of over-55s are planning to phase their retirement, by reducing their working hours and responsibilities before stopping work for good.
In recent years the number of people pre retiring considering a gradual phase is on the rise so retirement should feel managed and not perceived as a set date and done.
How Can I Phase My Retirement?
The pension freedoms was introduced in April 2015, giving you more options than ever when it comes to how you use your pension pot. You can choose when and how you take an income from your lifetime savings.
From the age of 55 you usually have the option to take up to 25% of your pension as tax-free cash, with a choice over how to draw the rest. You might choose to take some tax-free cash and leave the remainder to hopefully grow over time, for example. Or, if you have other income from employment, for example, or investments, you might delay taking your pension altogether.
Gradually drawing from your pension could help you to supplement your earnings, meeting any shortfalls, while carefully managing your tax allowances so you don’t pay more tax than necessary. You may, for example, decide to take just enough from your pension to stay within the basic-rate tax bracket. You pay tax on your pension income at your marginal rate, so any income above £12,570 (your annual personal allowance) is taxed at the basic rate of 20%, rising to the higher rate of 40% on income above £50,270 and additional rate tax at 50% over £150,000. But how and when you choose to take your pension will depend on your personal circumstances.
Remember that it’s important to take care when accessing your retirement savings to avoid additional tax charges. Bear in mind too that the more you take out of your pension early on, the greater the risk of you running out of money later down the line.