Tips for your last year before Retirement

1 month ago

Retirement is an exciting milestone, but it also brings big changes that require careful planning. If you’re in your final year before retiring, now is the time to get organised to ensure a smooth transition into this next chapter of life.

In this article, I’ll walk you through six essential steps to help you prepare for a financially secure and emotionally fulfilling retirement.

I have also put together a video on this topic that you can view here 👉👉 last year before retirement

1. Maximise Your Pension Contributions

Your last year of work is a great opportunity to give your pension pot a final boost.

For example, if you’re earning £100,000, you could contribute the entire amount into your pension, benefiting from:

Tax Relief: The government adds an extra £20,000 to your £80,000 net contribution, grossing it up to £100,000.
Higher-Rate Tax Benefits: You can claim back an additional 20%, making your contributions even more efficient.

This strategy can significantly enhance your savings, ensuring you have a solid financial foundation.

2. Review Your Pensions

Over your career, you’ve likely accumulated multiple pensions. Take time to review them:

Valuable Guarantees: Older pensions might include features like guaranteed annuity rates, minimum pensions, or protected tax-free cash. These are often worth preserving.
Flexible Access: Some older pensions may not support modern drawdown options, which allow you to withdraw as much or as little as you need. If necessary, consider transferring to a suitable plan.

This process can be complex, so seeking advice to understand your options fully can be invaluable.

3. Discuss Plans with Your Partner or Spouse

Retirement is not just about you—it affects your family too.

Timing: Will you and your partner retire at the same time, or stagger your retirements?
Income Impact: If your household relies heavily on your income, what adjustments will be needed?
Shared Goals: Align on what retirement looks like, from travel plans to how you’ll spend time together.

Open communication ensures you’re on the same page and prepared for any changes.

4. Think About Your Legacy

Retirement is a good time to consider what you’d like to leave for your loved ones:

Do you plan to spend your savings fully, leaving only your home behind?
Or would you like to pass on some of your pension or investments?

This decision will shape how you approach spending and withdrawals, so it’s an important conversation to have with your partner or family.

5. Understand Your Income and Expenses

It’s essential to know how much income you’ll need in retirement and where it will come from:

Review your bank statements and direct debits to identify your spending habits.
Factor in additional costs for holidays, gifts, or home maintenance—things you’ll likely still want to enjoy.
Match these costs to your income sources, including pensions, savings, and investments, to ensure your plans are sustainable.

6. Prepare Emotionally for Retirement

Retirement isn’t just about the finances—it’s a major lifestyle change. Many people find their identity tied to their careers, and stepping away can feel daunting.

Here’s one way to ease the transition:

Phased Retirement: Start by taking an extra day off each week to explore hobbies or activities you enjoy. Gradually reduce your workdays until you’re ready to fully retire.

This gradual approach helps you adjust and build a fulfilling post-work life.