Retirement Planning: 7 Decisions That Can Affect Your Income

If retirement is just around the corner, you're probably asking a different set of questions than you were ten years ago.

Not:

"Am I saving enough?"

But:

"Am I ready?"

The final years before retirement often involve some of the most important financial decisions you'll ever make. Here are seven worth getting right.

Most people know roughly how much is in their pension. Far fewer know how much income it could provide. Before making any retirement decisions, work out:

• How much income you'll need each month
• Which expenses will continue into retirement
• What income you expect from pensions, savings and the State Pension

Retirement is funded by income, not fund values.

Many pension arrangements allow you to take part of your pension as a tax-free lump sum, subject to Revenue rules and limits.

Before taking it, ask yourself:

• Do I need it?
• What will I use it for?
• Will taking more cash now reduce my future retirement income?

The right answer depends on your circumstances, but it's worth thinking beyond the first year of retirement.

Many people focus entirely on their private pension and overlook the State Pension.

Before you retire, understand:

• When you're eligible to receive it
• How much you may receive
• How it fits into your overall retirement income plan

The State Pension may form an important part of your retirement income.

One of the biggest adjustments in retirement is no longer receiving a monthly salary.

Many retirees find comfort in having accessible savings for unexpected costs such as:

• Home repairs
• Healthcare expenses
• Supporting family members
• Other unforeseen spending

Having a financial cushion can help reduce pressure on longer-term investments.

This may not sound like a financial decision, but it's an important one.

People often spend years planning how they'll fund retirement and very little time planning how they'll live it.

Consider:

• Travel plans
• Hobbies and interests
• Volunteering
• Part-time work
• Time with family and friends

Retirement tends to work best when you're retiring to something, not simply retiring from work.

Retirement is a good time to review the bigger picture.

Ask yourself:

• Do I have an up-to-date will?
• Are my beneficiaries up to date?
• Have I discussed my wishes with my family?
• Have I thought about how I'd like to help children or grandchildren?

Estate planning and retirement planning often go hand in hand.

One of the biggest retirement decisions is how you'll turn your pension into an income.

Some people value flexibility and choose an Approved Retirement Fund (ARF).

Others value certainty and prefer an annuity.

Some choose a combination of both.

The right option depends on your circumstances, income needs and attitude to risk.

Understanding those choices before retirement arrives can make the decision much easier.

• What income will I need each month?
• How long could my retirement last?
• What role will my tax-free lump sum play?
• How much flexibility do I want?
• What would give me peace of mind?

The answers can help shape every retirement decision that follows.

A final thought

Retirement isn't about making perfect decisions. It's about making informed ones.

The more clarity you have before retirement begins, the more confidence you're likely to have when it arrives.