Regardless of if you are about to retire, or have just launched your career, it's essential that you spend some time thinking about how you're going to fund your retirement.
To do this, there are two key questions you need to ask yourself: How much money am I going to have when I retire, and how would I like to receive that money? The most common way to determine how much money you'll have is to use a pension calculator.
Based on information you input about such things as your current salary, your savings and how long you have left until you retire, such a tool will be able to calculate how much money you can expect to receive when you do finally call time on your working life.
Not only that, but it's also a great tool for allowing you to see if you need to adjust the amount you're saving towards your pension now, in order to have an adequate sum for your retirement.
When considering how you'd like to receive your money, there are a few factors you need to be aware of.
For example, if you've been paying money into some form of pension scheme, such as a money purchase plan, you'll need to turn that money into an income once you retire.
According to the experts, the best way to do this is to purchase an annuity.
This basically means you pay a sum of money from your pension fund to an annuities provider, who in turn will transfer it into an income for you.
This will continue for the remainder of your life.
There are several types of annuities available -conventional annuity with a level or changing income, with-profits annuity, or unit-linked annuity - which can provide you with various different advantages.
Which one you opt for is dependent on your individual circumstances and will affect how much cash you receive.
It's absolutely essential however, that before you jump straight into buying an annuity you consider each option carefully, as once selected it cannot be changed.
Another option you can choose is to take out a tax-free cash lump sum.
Generally speaking, you're able to extract a maximum of 25 percent from your pension plan, which will not be tax deductible.
Although this option means your overall pension will be lowered, you're then able to invest the lump sum in other schemes.
Another way to secure cash once you've retired is to take out an Equity Release scheme.
This involves taking out a loan on your property or selling all or part of your home in return for a regular income or a lump sum.
They can be great for obtaining a lump sum of cash from your home, but are not always the best option for everyone.
Consequently, make sure you do your homework before agreeing to sign up for one.
This is a lifetime mortgage.
To understand the features and risks, talk to a financial adviser.
Taking out a lifetime mortgage could affect your tax position, your eligibility for means tested benefits and ability to move or sell your property.
A lifetime mortgage will reduce, possibly to nothing, any inheritance you decide to leave.
So, before you retire, make sure you're up to speed with your financial situation.
By spending just a little bit of time researching your options now, you will save yourself from a potential hardship come your retirement, meaning you can fully enjoy your new found freedom! This article has been written for information and interest purposes only.
The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions.
Expert financial advice should always be sought and any links contained within this article are included for information purposes only.