Knowledge Hub | Articles

17 October 2017

Retirement - what are your options?

Gary Kiely, partner, Wills, trusts and probate, advises on the options available for your retirement

When is the earliest we can retire? Do we have to wait until we’re 68 or can we achieve it in our 50s or even earlier? This question is experiencing a certain zeitgeist at the moment, with TV and radio covering it extensively. Although financial advisers have an important role in helping you to achieve this, a private client lawyer should always be consulted too. Gary Kiely explains why by dealing with some of the most common questions his team of lawyers are currently being asked.

What needs to happen to make early retirement feasible?

Ensure you have enough income and savings to live on for the rest of your life. And this will be dependent on your lifestyle.

But it’s also worth deciding what should happen to any savings that you have left, if you were to pass away when you still have this nest egg. This may be very difficult to think about, but many people want to help out their loved ones when they’re gone, but the inheritance tax on the money that you leave behind may be a huge problem.

Thankfully, there are various ways that this can be alleviated and regular meetings with your private client solicitor is a must because the law and people’s circumstances change all the time.

One of the most tax efficient ways of preparing for retirement is through your pension allowance. You will get income tax relief when the money is paid into your pot and it is excluded from inheritance tax calculations in most cases. If your pension pot is set up correctly, it will then be considered outside your estate for inheritance tax purposes and can be passed on to your spouse or your children inheritance tax free.

Once inherited, they can then draw on the pot themselves and just pay income tax against their withdrawals. The pot can then be passed on again if funds have not been completely withdrawn and under the current rules these funds will also be inheritance tax free.

If someone doesn’t have quite the required amount of savings to retire in their 50s, is there anything they can do to make this happen?

It is becoming more popular for people in their 50s who wish to retire early to sell their family home and buy a smaller property.

Trusts are also worth thinking about as they can act as a protection of your capital. For example, if you’re in a second marriage, own a property and want the children to inherit the property, but would like your second spouse to live in the property for the rest of their life, certain types of trusts can help with this. The other advantage to this arrangement is, that if your second spouse needs to go into care, the local authority will not be able to use funds from the property to fund the care.

If someone is currently in their early 50s and looking to retire in the next five years, what should they be considering financially before they make the decision?

Some financial advisers can help to forecast the amount that you will need to keep you. Private client lawyers often work in unison with these FA’s to advise on the tax planning side.

Regardless of age, how much would you recommend someone needs to retire?

There is no one way of doing this and we would need to look at individual circumstances and consider what that person thinks is most important to them. For example, do they want to have enough to pass on to their children or have enough money to pay for care; and then we can start to quantify how much is needed.

For legal advice on how to plan for laterlife, contact Gary Kiely on 01753 278686 or email privateclient@bpcollins.co.uk.

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Email: enquiries@bpcollins.co.uk

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