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Financial planning in your 60s

Some careful financial planning in your 60s can make a real difference. With the right decisions you can set yourself up for a secure financial future.

| 9 min read

Your 60s is when many of life’s plans come to fruition. Hopefully, you will be financially secure and mortgage free (or close to) and will have built sufficient provision over the years to allow you to plan for the next stage, retirement perhaps, or at least winding down at a time to suit you.

Everyone’s path in life is different, with varying levels of resources, but there are some common priorities and steps to take at this life stage, whether you are focused on establishing savings or preserving the wealth you have built. It can be confusing to know where to start, so here’s a list of key areas to focus on to help ensure your finances are in good shape for your 60s and beyond.

5 tips for financial planning in your 60s

1. Determine what your retirement looks like

The journey into retirement is often an uncertain one, which is why many people worry at some point about making a mistake. But there are also positives. Retirement is increasingly flexible, occurring in stages or phases, which can be a practical alternative to the traditional abrupt end to work, and a way to balance employment or self-employment with travel or favourite pastimes while still active and in good health.

Retirement could last half as long as your working life, or even longer, so lots of people wonder when they can retire or semi-retire and whether they have adequate resources to commit to it. It can be hard to get a handle on this and it’s all too easy to underestimate how much capital you need to generate the income you require for the rest of your life. To help you plan you can use a pension calculator to estimate how much you need to reach your retirement goals.

The calculator considers your current pension savings, any future contributions and your life expectancy. If you're still earning you could consider topping up your retirement savings and maximising tax relief. One way to do this is make additional contributions to your pension, and to maximise investment flexibility consider a Self-Invested Personal Pension (SIPP). For others downsizing may be an option for some to release cash from your home to generate more retirement income.

2. Examine your pension choices

When you are preparing for retirement, you have lots of decisions to make, not least how to convert any pension pot into retirement income. In addition, you need to consider your other assets such as savings and investments as there may be tax benefits to keeping money inside a pension and utilising other means to fund retirement.

Your 60s is when ‘defined benefit’ pensions usually become payable. Meanwhile, 65 is traditional the ‘default’ retirement age for most personal or ‘defined contribution’ pensions, although the reality is you can start to draw on them when you want from age 55, although that is set to rise to 57. For personal pensions you don’t have to start taking pension income by any particular time, and for many occupational pensions you can also defer. If you are still working full time, it may make sense to do so as you could end up paying more tax than necessary.

When you are considering personal pensions, the main decision is whether you choose to buy an annuity (a guaranteed income for life with access to capital given up), draw an income from your pension investments via ‘drawdown’, or a combination of the two. It is worth spending time assessing all the options, as well as shopping around in the case of annuities, to make sure you are selecting an appropriate route. Although flexibility can often be built in, certain decisions are one offs that can’t be reversed. If you are uncertain as to which option or options are suitable you should seek professional financial advice.

3. Get your investment strategy right

Your path into retirement and how you plan to take income from your pensions and other investments will shape the investment strategy that’s appropriate for you. In particular, in the run-up to retirement, it may be prudent to gradually alter your investments in order to meet your objectives during retirement. For instance, if you are planning to buy an annuity it may be worth reducing investment risk. However, if you are primarily going to be drawing on your pensions via drawdown then you will need an appropriate strategy that takes sufficient risk to grow your pot but avoids excessive volatility and loss of capital.

You should also take a wider look at your assets and, if necessary, reset investment strategy for different pots of money. The general rule is stick to cash for your ‘emergency’ fund or for planned shorter term spending and invest for the longer term, which is generally considered to be a minimum of five years.

4. Get to grips with the state pension

The state pension represents an important component of most people’s income in retirement. For some it’s their only income, or a large part of it. Yet confusion abounds about how much is paid, from what age, and the rules for qualifying. If you haven’t already done so your 60s is the time for working out what to expect before it’s too late.

After you reach the eligibility age, at present 66, you can apply for the state pension. The maximum is currently £10,600 per year, but the amount you’ll get depends on your National Insurance (NI) contributions and whether your personal or occupational pension was ‘contracted out’ at some point.

Ahead of state pension age you can get a forecast from the Gov.uk website here. As well as checking your State Pension age, a forecast can tell you how much you could get and how it might be possible to increase it. You can also keep tabs on how your entitlement to the State Pension is building by monitoring your National Insurance (NI) contribution record, which again you can check at Gov.uk. Here you can see your history of NI credits received and any gaps in your record. It’s often possible to pay voluntary National Insurance contributions to fill these gaps, either for a full year or a partial one where you have paid some NI but not enough to gain a credit.

5. Think about succession and inheritance tax planning

Now may also be the time to start thinking about how you want to pass assets on to loved ones and inheritance tax (IHT) planning. These days you don’t even have to be that wealthy for the taxman to take a slice of your estate. IHT is paid on the value of an estate when the owner dies, but there are various ways to reduce a liability such as making gifts or setting up a trust. Follow the link to find out more on how inheritance tax works.

You should also make sure your will is up to date and that it reflects your current circumstances. Your will is a legal document that sets out your wishes for your assets after you die. It is also worth considering a Lasting Power of Attorney (LPA), especially if you are in poor health. LPAs allow appointed ‘attorneys’ such as a relative or friend to carry out your wishes if you become unable to do so yourself due to illness or mental incapacity.

Give your finances a health check

Planning your finances in your 60s can be a challenge. There’s typically lots of moving parts with different sources of income available at different times combined with an uncertain trajectory of expenditure and other considerations such as tax. With some careful planning you can set yourself up for a secure financial future, and you also don’t have to tackle it on your own.

Having a conversation with a financial professional can help you to take control of your finances, giving you freedom and peace of mind. With our OneStep Financial Health Check you’ll get a consultation with a Financial Planner and a clear action plan to take home with you. Having a conversation with an expert can help you to take control of your finances, helping you find freedom and peace of mind.

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The tax treatment of pensions depends on individual circumstances and may be subject to change in future. It is always recommended that you seek advice from a suitably qualified investment professional if you have any doubt as to the suitability of a pension and/or the underlying investments. You should be aware that Stakeholder Pension Schemes are generally available and might meet your needs as well as a SIPP. Please remember the value of investments may fall as well as rise and your capital is at risk.