The 10-year path to retirement

The scenario

Rachel, AOP member

“I have owned my own practice for 30-plus years now and looking at my 10-year plan, retirement is on the horizon. How can I best start preparing for this stage?”

The advice

Harmy Bains, independent financial adviser at Lloyd & Whyte

If you’re thinking of packing up your ophthalmoscope in the next few years, you’re probably on course to retire in the not-to-distant future.

You might be planning to draw on your personal and state pension, live within your means and hope for the best, but it’s important to know that with a little help, planning your finances for your future needn’t be difficult or expensive, and could be one of the best investments you ever make.

Planning for retirement can mean so much more than arranging a pension (although it usually includes this). Discussing your objectives and options with one of Lloyd & Whyte’s independent financial advisers could help you identify what you want to achieve and actively plan a course of action that helps you reach those objectives.

We have nearly a decade of experience in helping optometrists plan their retirement and organise their pensions effectively.

Why do you need a retirement plan if you already have a financial plan?

As a practice owner you will be adept at building a plan and strategy that helps your business survive and grow. Building an effective retirement plan is similar. With careful planning and taking the following factors into consideration, we can create a tailored plan suited to your needs and aspirations.

How much money would you need for your retirement?

These days there is a 50% likelihood of living beyond the age of 85, so your retirement income needs to last for at least 25 years.

Our independent financial advisers can help you gain insight into the following aspects:

• How much money will you receive from each type of pension you hold?
• When will you be able to access your pensions?
• How do you want your retirement to be?
• When can you retire?
• How much income can you allocate to your retirement?

The three main elements that can form your retirement fund are:

• Pensions
• Investments
• Savings.

Pensions

Pension allowances enable you to contribute to a pension before you are taxed on your pension pot. As of 6th April 2023, the annual allowance increased from £40,000 to £60,000 a year. This means you can save up to £60,000 into your pension pot without being taxed. In recent years the Lifetime Allowance (LTA) was £1073,100 but will be erased from 6 April 2024, which means there will be no limit to how much you can pay into your pension pot overall. 

While the LTA will no longer exist from next year, consulting an independent financial adviser can help you avoid unknowingly exceeding the annual allowance, benefit from various tax breaks, advise you on how to be tax efficient, and help you factor in any defined benefit pensions and your state pension, if applicable.

Savings and investments

Saving into a pension is a great way of funding your retirement, but having a few income streams can be a reliable way of working towards the retirement you’d like.

There’s also inflation to consider, including longer-term inflation. £20 today won’t buy you the same items as £20 will in 10 years’ time. Unless you manage your income and savings in a smart way, they could depreciate when you reach retirement age in, for example, 10 or 20 years’ time.

Why do you need regular reviews of your investment portfolio?

If you would like to start investing or receive help with your current portfolio, we strongly suggest you seek professional advice.

An independent financial adviser will be able to establish your ‘attitude to risk’ so that they can adjust the way your portfolio is managed.

Retirement can look different at the age of 55, 65, and 75. Adjusting your ‘attitude to risk’ to reflect your stage in life can be a major factor in managing a healthy portfolio.

There can also be change in other variables, including:

• Retirement age
• Contributions
• Withdrawals
• Tax wrappers.

Investing can be a great channel for generating growth around your income and current savings but please note that there is a risk of your investments going down, and no guarantee that your capital will be repaid or increase.

Wills and trusts

Have you factored into your retirement planning around passing on your wealth and assets to your family? Making a will, estate planning and planning around inheritance tax (IHT) can provide you with peace of mind and financial savings for your beneficiaries.

Regular financial reviews

Remember that plans and objectives constantly evolve, so it’s important to regularly review your retirement plan to stay on course.

If you’d like to start building a financial plan with Lloyd & Whyte please book an appointment or call: 01823 250750.

---

Lloyd & Whyte (Financial Services) Ltd are authorised and regulated by the Financial Conduct Authority. Registered in England No. 02092560. Registered Office: Affinity House, Bindon Road, Taunton, Somerset, TA2 6AA. It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Your home may be repossessed if you do not keep up repayments on your mortgage. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested.