Retiring in the next two years? 7 mistakes to avoid before you stop work

If you are planning to retire in the next two years, the decisions you make now could affect how much you can spend, how much tax you pay and how confidently you can stop working.

You may already have a retirement date in mind. But have you worked out how your pensions and savings will support the life you want?

In this video, Richard Platt from Clarity Wealth Limited explains seven common retirement planning mistakes and the questions worth asking before you hand in your notice.

Watch the video: 7 retirement planning mistakes to avoid

Seven things to check before you retire

1. Know how much you can realistically spend

Your pension balance alone cannot tell you whether you can afford to retire. Start by understanding your likely spending, including everyday bills, holidays and occasional larger expenses. Then consider how your income and savings could support those costs over time.

2. Review opportunities while you are still earning

Your final working years can be an important time to review pension contributions and tax planning. The options available depend on your earnings, allowances and circumstances, so it is worth exploring them before your salary stops.

3. Think before taking all your tax-free cash

Taking all your available pension tax-free cash immediately is not automatically the right choice. Consider what you need the money for, when you need it and how withdrawing it fits into your wider retirement plan.

4. Look at your pensions, ISAs and savings together

The order in which you use your money can affect your tax bill and how long your savings last. Looking at your accounts together can help you plan where your retirement income should come from, with the combination potentially changing each year.

5. Check whether your investments still suit your needs

Once you start relying on investments for income, market falls can have a different impact on your finances. Review whether your investment approach suits your planned withdrawals, your attitude to risk and your ability to cope with losses.

6. Understand your pensions before combining them

Combining old pensions may make things easier to manage, but some arrangements contain valuable guarantees or protected benefits. Understand what you own and what you could lose before deciding whether a transfer is suitable.

7. Test your plan before handing in your notice

What happens if markets fall, living costs rise or you live longer than expected? Exploring different scenarios can help you understand how your retirement might cope and whether adjustments could be needed.

How you take your pension matters too

The video also explains the difference between taking tax-free cash through pension drawdown and using uncrystallised funds pension lump sum withdrawals, known as UFPLS.

These options work differently, and the way you access your pension can affect the timing and amount of tax you pay.

Richard also discusses preparing for the non-financial side of retirement, including how you want to spend your time once work no longer sets your routine.

Would you like to discuss your retirement plans?

Clarity Wealth Limited is an independent financial advice firm based in Leeds, helping clients across the UK with pensions, investments and retirement planning.

If you are a UK resident approaching retirement, you are welcome to book a free, no-obligation initial call with us. It is an opportunity to explain your circumstances, ask questions about our service and find out whether we could help.

Our initial call and discovery meeting are free. If you decide to use our paid advice services, we will explain the fees before you commit.

Book a free initial call with us

Important information

This article and video provide general information only and are not personal financial advice or a recommendation.

The value of investments can fall as well as rise, and you may get back less than you invest. Retirement income drawn from invested funds is not guaranteed.

Tax treatment depends on individual circumstances and may change. Pension tax-free cash is subject to applicable allowances and scheme rules. Cash-flow modelling uses assumptions and does not guarantee future outcomes.

Clarity Wealth Limited is authorised and regulated by the Financial Conduct Authority.