Take control of your retirement in 2016
"Every day in retirement is a day of choice. You are your own boss and write your own job description," or so says Dave Sinclair, a trainer for Later Life retirement courses.
For some of Sinclair's clients, retirement is a chance to spend time doing all the things you love and haven't had time to do. But for others, retirement isn't quite so appealing.
"Lots of our clients are concerned about their retirement," he adds. "They don't know what they'll do. Their concerns are often about finance but also about filling their time."
Delegates on the Later Life courses are encouraged to think about all aspects of their retirement - how they will fill their time, how they will stay fit both mentally and physically, if they have a partner how that relationship will change and also how they will manage their money.
Since the abolition of the default retirement age in 2011, which means employers can no longer force you to retire the day you turn 65, those coming to the end of their working lives now need to think more about their own retirement. Should they take advantage of their new-found freedom and stop working as soon as their pension entitlement kicks in, or work a few more years to boost their retirement coffers?
Increasingly, retirement is becoming a phased process. Considering himself 'semi-retired' Sinclair now works part-time for Later Life Learning, the company he runs with his business partner. Aged 67, he works two to three days a week and plans to stick with that for another three or four years. "I really enjoy it, I get out and meet some great people – it gives me such a buzz. I can't imagine doing nothing."
Office for National Statistics figures show the number of people working past 65 has steadily been increasing. Chris Brooks, policy adviser for employment and skills at the charity Age UK, says for some people it's a financial necessity.
"According to the Pensions Policy Institute, half of people need to work six years past their state retirement age to maintain their standard of living," but for others, they simply cannot imagine life without it. "A very large number of people like the social interaction they get from work, which they can't get outside of employment."
Away from work, Sinclair fills the rest of his week spending time with his six grandchildren, playing the clarinet and running. "I do a lot of running and recently ran a marathon in the Alps."
Structure your week
If you're struggling to work out how you will fill your time, Sinclair has a number of tips. "One of my fellow trainers breaks down his week – two days earning, two days learning and three days for fun."
Another tip is to draw up a three-by-three grid. In the first column, put three 'basic' or essential activities – this might include home, family, friends or work if that's something you decide to do. The second column should be made up of three activities you'd like to do more of, be that reading, golf or amateur dramatics. In the third column, try to think of three new things you'd love to do such as voluntary work, learning a language or flying remote-controlled aircraft.
While work will give your finances a boost – the cost of travel, days out and new hobbies can easily rack up, so Sinclair encourages retirees to think about activities that fill up your time without draining your wallet.
Voluntary work can be a great way of doing this – contact local charities or look at volunteering websites for ideas. If you want to spend time learning but don't want to spend a fortune on courses, look for more informal alternatives, such as the learning co-operative, the University of the Third Age, which has branches across the UK. For fresh air and exercise, join a walking group or take advantage of your bus pass, pack a picnic and explore your local area.
Working out a budget
Of course, every decision you make about work, your health and fitness, not to mention your activities and social life will be impacted by money. "Finance is an integral part of your retirement," says Sinclair but he tells his delegates when it comes to it, "more people are pleasantly surprised than horribly shocked". But that doesn't mean you don't need to plan. A central part of your retirement planning is finding out how much money you have to live on and working out a budget.
If you will use your pension fund to buy an annuity, a core part of this is shopping around for a good deal. Andrew Tully, pensions technical director at MGM Advantage, says never just accept the first offer from your pension company. "An annuity is a once-in-a-lifetime purchase, so make sure you shop around for the right shape as well as the best rate."
He adds: "You should also remember to mention any health and lifestyle conditions, such as diabetes or smoking, as these can make a huge difference to the income you receive, as much as 40% or more in some cases."
Once you know how much you have to live on, it then makes sense to look into which expenses you can trim.
Easy spending cuts
Jo Ganly, a spokesperson for uSwitch, says it's vital to get into the habit of using comparison sites to save money on your household bills. She points out 60% of us are still with our original energy supplier and 75% of us are paying pricey standard tariffs.
"The cost of household bills has rocketed in recent years. This is putting household budgets under pressure. The fact is gas and electricity are bog-standard – there is no point paying more than you have to because you are still getting exactly the same product," she says.
In the rush to plan for the here and now, don't forget your retirement could be long and you need to plan for financial challenges further down the line, such as inflation or the cost of care. If you have any concerns, it is worth seeking the advice of a good IFA.
It may sound like a bit of a challenge, but if you can get the sensible planning bit done now and you can get down to the serious business of enjoying yourself, confident your finances are in hand.
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.