A guide to managing your later-life finances

Val Watson
Authored by Val Watson
Posted Thursday, June 27, 2024 - 9:12pm

As we approach later life, managing finances becomes increasingly crucial to ensure a comfortable and secure retirement. With new research indicating that as many as 28 per cent of UK adults don’t know how much money they will need to save for later life, greater understanding is crucial to ensure people’s comfort in their old age.

Confronting financial decisions can be daunting but it’s helpful to break things down into priorities to better organise your plans. This guide will cover some key points of advice to set you up for a bright future.

Know your numbers

Understanding your financial situation is the first step. This involves assessing your income sources, including pensions, savings, investments and any other assets. Keeping track of all your financial resources will help you make informed decisions about your spending and saving, as you’ll be able to project what’s possible to achieve.

Create a retirement budget

Having a clear picture of your expenses is just as vital if you’re to set yourself up for the retirement you want. Start by listing all your regular outgoings, such as utilities, groceries and any outstanding debts. As you get closer to retirement, you may also have changing needs when it comes to getting an over-50 life insurance plan – the more of these potential changes to your outgoings you can anticipate, the better. Include occasional expenses like holidays and unexpected costs.

A good rule of thumb when budgeting is to follow the 50/30/20 rule: allocate 50% of your income to necessities, 30% to discretionary spending and 20% to savings​. This can help ensure you live within your means – and enjoy doing so – while still saving for the future.

Debt reduction

The less debt you have, the more secure your retirement will be. In particular, high-interest debts such as credit cards or personal loans can erode your savings and limit your financial flexibility. Focus on paying these off first. If you have a mortgage, consider options like downsizing or equity release to reduce monthly payments​.

Maximise your savings

Making sure that your savings do as much as they can is as important as saving at all. Make the most of tax-efficient savings accounts like ISAs and consider investing in pension schemes if you haven't already. It's important to have an emergency fund that covers at least six months of living expenses, although more than 11 million British adults don’t have as much as £1,000 stashed away to deal with the unexpected. Regular savings, even in small amounts, can accumulate significantly over time.

Seek professional guidance

Navigating later-life finances can be complex and professional advice can be invaluable. A financial adviser can help you develop a comprehensive plan, considering all aspects of your financial situation. They can provide insights into pension options, tax planning, estate planning and long-term care funding.

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