How you could handle retirement – before, during and after

Retirement is a significant life transition, and it can be overwhelming. Here’s how you could prepare for what may come during each phase of the process, including making sure you’re financially organised.

Retirement sounds final. In the run-up to this significant day, there are some things to consider that could help you prepare.

Pre-retirement planning

This first stage usually takes place five to 10 years before you plan to retire. You’ll want to review how much money you will need to fund your retirement years. Your answer will depend on the income you are used to and what you want to do.

As a guide, the Pensions and Lifetime Savings Association (Opens in new window) (PLSA) at Loughborough University has worked out how much on average a couple or single person will need to support their retirement each year, depending on whether their living standards are minimum, moderate or comfortable. Don’t forget these figures are rising steadily due to inflation and so will almost inevitably be higher by the time you retire.

Minimum

• Single: £14,400
• Couple: £22,400

Moderate

• Single: £31,300
• Couple: £43,100

Comfortable

• Single: £43,100
• Couple: £59,000

At this stage, it’s important to make sure any money you’ve invested is striking the right balance between risk and reward. That’s because if you take on too much risk and your investments suffer a sudden fall in value, you might have to delay retirement or accept a lower income. This is where help from a financial adviser could be useful.

If you plan to stop working completely after you’ve retired, then now could be the time to maximise your pension contributions, which could benefit from tax relief at either 20%, 40% or 45% depending on your marginal rate of income tax. You may even have unused allowances from up to three previous tax years. There is actually no limit on how much you can contribute to your pension each tax year. However, for most people, the maximum pension contribution you can currently make under the pension annual allowance and benefit from tax relief is the lower of 100% of your earnings or £60,000.

An online pension calculator can help you forecast the pension income you're likely to receive when you retire. Depending on the calculator used, it usually looks at the amount in your current pension fund, plus any planned contributions, and the time left before your proposed retirement date. It then makes projections using various assumptions such as the rate of return and projected inflation rates, and potentially any fees payable. A calculator can also help you see how long your pension could last. It's important to remember, however, that any income quoted is not guaranteed and that forecasts are not a reliable indicator of future performance.

Retirement day arrives

This is a significant life event, so take some quality time to reflect on your career and achievements. How you mark the occasion is up to you. It could be a retirement party or a much-deserved break just by yourself.

However you reflect, it’s worth recording the achievements you have made in your career and how you can use what you’ve learned as you enter into an exciting new chapter in your life.

Post-retirement plans

This stage is a blank canvas, which makes it exciting but also daunting. People spend the years immediately after retirement pursuing a bucket list of activities, such as travelling or taking up hobbies and interests they’ve longed to get into.

You might miss the structure and social side that working life gave you, so make time to lean on your friendships and family for a sense of community. You could decide to take up volunteering or even get a part-time job in an area you’ve always been interested in but never had the time to pursue.

Retirement doesn’t have to mark the end of your working life at all – it could be the start of doing something different but equally fulfilling with your new-found freedom.

Introducing Nutmeg

Introducing Nutmeg, the digital wealth manager that's part of the Chase family. You can now open a pension with Nutmeg (Opens in new window) and keep an eye on your investments through the Chase app (Opens in new window) – so you can see everything in one place.

As with all investing, your capital is at risk. The value of your investments with Nutmeg can go down as well as up, and you may get back less than you invest. Tax rules depend on individual status and may change. If you are unsure if a pension is right for you, please seek financial advice. For personalised advice tailored to your specific situation please consult with a qualified tax adviser or financial planner.

Recommended reading

• How you could retire with your friends

• Returning to work after an early retirement

• Property or pension – which is better to fund retirement?

Nutmeg is authorised and regulated by the Financial Conduct Authority in relation to certain investment services and restricted advice only. Chase is a trading name of J.P. Morgan Europe Limited. Nutmeg and J.P. Morgan Europe Limited are J.P. Morgan companies. Investments are provided by Nutmeg and are not guaranteed by Chase. 18+, UK residents. Chase current account required. Before applying, you should consider if a Nutmeg account and its features are suitable for you and your investment needs.

Disclaimer: This article is for information only and does not constitute financial advice. Tax treatment depends on your individual circumstances and may be subject to change in the future. We do not offer any tax advice.