Determining exactly how much you need to save for retirement can be challenging. Your goals might range from travelling the world, to renovating your home, or simply spending more time with your loved ones.

There’s a good chance these aspirations will affect the amount you need to save, as these different lifestyles have varying costs. However, if you don’t plan adequately, you might still fall short of even the most well-thought-out saving target.

If you’re concerned about running out of money in retirement, you certainly aren’t alone. Research from Oxford Risk, reported by Which?, reveals that more than half of over-55s (51%) worry that their pension savings won’t last as long as needed [1].

So, to secure some much-needed peace of mind, continue reading to discover several strategies that could ensure your wealth lasts as long as you need, and how a financial planner can help you tie everything together.

It’s vital to optimise your income through retirement

One approach to managing your retirement wealth is through “income optimisation”, a strategy the informative video below explains:

As an example, imagine you need a retirement income of £48,000 next year to achieve your goals and maintain your standard of living.

Taking this full amount from your pension fund would cost you £59,054, as you would pay £11,054 in Income Tax.

However, since many investment portfolios typically include a tax-free element, drawing from this alone could mean you’re able to access £48,000 without paying any tax.

Better yet, since the remaining part of your portfolio would stay invested, your wealth would continue to grow, and you can repeat the process.

If, in this example, you optimise your wealth correctly for four years, your retirement income could essentially be “free” by the fifth year, compared to having drawn this wealth directly from your pension each year.

You may want to think twice before you access your pension wealth

To ensure you properly optimise your income in retirement, you may want to think carefully before you draw from your pension.

While it might be tempting to access your pension wealth as soon as you reach the minimum age (55 in 2024/25, rising to 57 by April 2028), you may have other sources of income worth using first.

Indeed, pensions typically benefit from tax-free growth, interest, and dividends. So, leaving this invested for as long as possible could allow these benefits to accumulate.

In some cases, spending any excess cash in a savings account might even be more sensible before you dip into your pension fund.

Another wise strategy to manage your retirement wealth is to make good use of ISAs. For instance, you may want to gradually phase taxable investment accounts from your ISAs over time since they protect your wealth from Income Tax, Capital Gains Tax, and Dividend Tax.

This is beneficial as it gives you a tax-free income that allows you to preserve your pension for the future.

Ultimately, structuring your withdrawals in a way that minimises your tax liability could help preserve your retirement wealth, helping it to last as long as you need.

A financial planner could give you some much-needed support

While there are several strategies to help you make your pension wealth last, creating a sustainable income plan requires careful thought and in-depth knowledge.

Research by the Financial Conduct Authority (FCA) revealed that only 9% of respondents had taken regulated advice in the 12 months leading to the survey. This was despite the fact that 75% of consumers over the age of 45 did not have a clear plan for how to take money from their pension or didn’t know they had to make a choice [2].

So, you may want to seek the advice of a financial planner before you draw from your pension. We could help you decide which income sources to access first, support you in structuring your pension withdrawals tax-efficiently, and advise you on how to make the most of your tax-free allowances.

A planner can help you build a clear and comprehensive strategy that provides for your desired lifestyle while also protecting your future financial security.

Get in touch

Whether you’re worried about running out of money in retirement or simply want some reassurance that you’re on the right track, we can help.

Email info.wp@titanwh.com or call us on 0800 048 0150 to find out more.

Please note

The information contained in this article is based on the opinion of Titan Wealth Planning and does not constitute financial advice or a recommendation for any investment or retirement strategy.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.