With ten years to go, a Fool starts thinking ahead.
In September 2020 -- in exactly ten years time -- I'll be 66. By then, of course, the government's planned changes to the male retirement age will very likely mean that it will be at 66, not 65, that I'm eligible for a state retirement pension.
And ten years from retirement is the timescale that advisers ideally recommend people to begin planning for retirement. So, as there's no time like the present, I thought I'd better start.
In a few articles here on The Fool over the next few months, I intend to relate how I get on. As always, shout out in the comments box below if you think I'm missing a trick, or you'd like an answer to a specific question.
Gentle transition
Not that I'm planning to come to an abrupt stop, workwise, in September 2020. The south Devon coast, where I live, is something of a retirement beacon, and provides an ample supply of object lessons in the shape of other retirees.
I see too many retirees at a loose end, for example, trying to fill their days -- and in the process spending rather more money than perhaps they ought to be doing.
I also see people who were perfectly capable of carrying on working, but who were forced to retire by mandatory age limits, imposed by either their employers, or by law.
And I also see pensioners in reduced circumstances, having stopped working, but also coming to the recognition that their pension and savings won't provide the comfortable retirement that they had hoped for.
So the rough game-plan is to transition gently into full retirement, gradually earning less from self-employment, and drawing more on investment and pension income. The SIPP into which I invested my former Equitable pension pot, for instance, has a target retirement date of 70 in mind. But I hope to transition to part-time working semi-retirement well before then!
Questions to ask
As a game plan, it sounds great. But as things stand, it's more of an aspiration, rather than a fully-costed attainable objective.
That SIPP, for example -- one of two that I have -- is growing nicely, but what sort of an income is it likely to deliver? And at what point -- if at all -- should I switch it into safer, less volatile investments? And how will that affect the eventual return?
Similar questions apply to the second SIPP, of course, as well as to an ISA containing index trackers. Not to mention an ISA holding -- mostly -- high-yielding shares.
Other concerns are more prosaic. What is my state pension likely to be? What, if anything, should I do about a former employer's defined benefit scheme? And as teenage kids fly the nest, what level of contributions to a SIPP should I make going forward? Or should I stick with putting the money into an ISA, instead?
Changes ahead
And then, of course, there are all the changes that are taking place to the pension landscape. Some don't affect me, of course: I'm self-employed, unlikely to return to paid employment, and needn't worry about developments such as NEST, for instance.
But other changes do affect me -- such as the government's stated intention to scrap the compulsory requirement for pension savers to purchase annuities by age 75. The more I think about that, the more I like it, and I'll be watching developments closely.
Likewise the likely ending of mandatory retirement ages. Locally, I see a number of nominally-retired people holding down part-time jobs, partly out of interest, and partly to top up their incomes.
I confess to not really understanding HMRC's age allowance system, but what I do know is that there can be a high marginal tax take on income -- earned income and non-ISA investment income -- in such circumstances.
Help from the Foolish community
As I start planning, there are some great resources here on The Fool, of course. There's our popular Pensions - Practical Problems board, as well as the Retirement Investing board. And of course, there's the SIPP board.
The High Yield Portfolio board, too, is devoted to investors who are building a pension pot of dividend-paying shares as an alternative to an annuity. As I mentioned, I have a High Yield Portfolio, and I'm continuing to invest in it.
And over the years, some great discussion board posts and articles have already helped me to get to where I am now. This post, for example, contains a helpful pension planning spreadsheet. Here are some sage thoughts on dividend withdrawal. And here's a more recent post looking at the risk of outliving your investments.
All very much thought-provoking stuff.
So in the weeks and months ahead, let's see how I get on.
More from Malcolm Wheatley:
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