What does retirement planning involve ?
Until a few years ago, many people were in careers that were often called jobs for life. These were usually in commercial businesses such as insurance companies and banks, as well as many government departments and local authorities.
One of the benefits of these types of jobs was that they had an automatic built-in pension, sometimes contributory and sometimes non-contributory. The benefit to the employee was that their retirement planning was in effect done for them, with a guaranteed pension available from a certain age.
The pension would quite often contain guarantees for life assurance, a pension for the spouse in the event of an employee passing away and other benefits.
Pension plans
The job market has changed hugely in the last decades, and these types of jobs are much rarer, and the pensions that come with them, are usually never as generous as they used to be.
What this has meant for individual employees is that they have had to start taking responsibility for their own pension plans, either in addition to a company plan or as a completely separate financial commitment.
This can prove quite a complex area, as it often involves long-term financial planning, usually including a number of investment plans.
Financial planners
It is normally possible to obtain independent financial advice, either from an employer or from a firm of financial planners, who may either make a charge for their services or take a commission from any company they recommend. In either event, some degree of retirement planning is likely to be needed by most employees of companies and government departments, ideally sooner rather than later.
Timeframe
One important factor in all types of financial planning is the timeframe before how long an individual retires. This may need to take into account if they are eligible for a government pension, and if so, when and for how much. Government requirements have changed over the years, and are likely to change again in the future. This places even more responsibility on the individual to make their own assessment about their retirement needs and plans.
Estate planning
Retirement planning is in large part about securing a pension that will give an income that is sufficient to meet the needs of the individual and their family. This can be very difficult for many people, given the amount of capital that needs to be invested over many years to secure such a pension.
Estate planning is often about issues such as the value of someone's home, other investments they may have, any medical conditions that need dealing with and other family commitments. It may be part of the overall retirement planning process to consider selling a home and moving somewhere else, either as a deliberate choice to have a fresh start or in order to release equity from their home to help with financial commitments in retirement.
Retirement needs
Any type of financial planning around retirement needs to be based on the needs of the individual and any appropriate family members. This may include a spouse, elderly parents, children at university or college and potential long-term care needs of the individual themselves. These can be difficult choices to make, but once the needs are established, it is likely to become clearer how much money is needed, and what the best sources of that income are likely to be.
For more information on retirement planning, contact a professional near you.
