Planning for retirement in your 50s

11 April 2024

If you’re approaching your 50s then now is the ideal time to get planning for your retirement. By setting goals, assessing your financial situation and researching your pension options, you can take a proactive step towards a secure and enjoyable future.

This article will guide you through some essential steps to begin planning for retirement in your 50s.

What we’ll cover:

• Why it’s important to assess your financial situation now.

• How to trace and consolidate your pension pots.

• Understanding your future retirement income options.

• Tips for maximising your retirement income contributions.

Plan your retirement goals 

The first step in planning for retirement in your 50s is to assess your retirement goals. This dictates the level of savings and income you need to achieve the lifestyle you want in retirement. Consider when you want to begin your retirement and what you want your retirement to look like. Perhaps it's travelling, pursuing hobbies or simply enjoying more family time?

You can currently begin to access your pension savings from the age of 55 (changing to 57 from April  2028), although you may not plan to retire this early. Many choose to work until they reach State Pension age or even beyond. Having a clear vision will help you in the next step as you begin to budget for the years ahead.

Assess your financial situation

Next, take a close look at your current and future financial situation. Consider your income, savings, investments, and any outstanding debts. Draw up a retirement budget to plan your total expected income and outgoings each month. This will help you to work out how much money you need for retirement.

Remember to factor in the State Pension, which currently pays out £10,636 a year to those who qualify for the full amount (increasing to £11,541 from April 2024). If you are not on track to get the income you need, you could consider increasing your pension contributions or scale down your retirement plans where possible.

Maximise workplace pensions

If you are employed, it's likely that you have access to a workplace pension scheme. You may wish to contribute the maximum your employer allows if you can afford to, as employer contributions are incredibly valuable and usually in line with what you put in. This can significantly boost your savings.

Look for potential lost pensions

If you have a number of pension pots after working for different companies during your career, you should check if you have the details for each of them. This will help to prevent delays when you come to retire and wish to access your money.

Don’t worry if you can’t remember how many pension pots you have accumulated with former employers. The government offers a free Pension Tracing Service to quickly and easily find old pensions you might have lost track of. You may find that you have one or more lost pensions with forgotten money sitting there!

Consolidate your pensions

Choosing to consolidate pension pots from multiple providers into one scheme has a number of potential benefits. It could be an option if you have been saving into more than one ‘defined contribution’ personal pension or workplace pension scheme. 

By bringing multiple pension pots into one account, you can potentially reduce your administrative burden. This simplicity can help you gain a clearer understanding of your retirement savings. You may also be able to reduce your costs, by removing duplicate fees or finding a pension scheme provider with lower fees than your current providers.

It’s not for everyone, however. Potential drawbacks include the loss of valuable benefits that your existing scheme/s may offer. The government-backed Money Helper website has useful information about consolidation. You may also wish to seek specialist guidance or advice before making a decision. 

Read up on pension income options

Use this time before retirement to understand your pension options. It’s all about looking at the different ways that your savings and investments can provide you with a retirement income. 

There are a few options to consider so it’s important you weigh up all the benefits and drawbacks of each and consider which one/s might complement your retirement plans best.  

Unless you intend to withdraw all your pension savings at retirement to clear the mortgage, for example, then your main retirement income options include:

Pension annuities: A pension annuity converts your pension savings into a guaranteed regular income. There are three main types: a conventional lifetime annuity, a fixed-term annuity and an enhanced annuity. For ease, you can compare the different types of annuity here.

<< Find out how much annuity income you could achieve from your pension pot here >>

Income drawdown: Flexi-access drawdown enables you to take an income from your pension fund as and when you need it. Your pension savings remain invested and the remaining money is available for your family to inherit on your death. Unlike an annuity, however, the income you’ll receive over your lifetime is not guaranteed and depends on investment performance.

Look at other savings and investment options

In your 50s, it's crucial to understand your savings and investment options. If you don’t have one already, you could consider opening an individual savings account (ISA) to take advantage of the tax-efficient savings every year. There are different types of ISAs to consider so do your research to find the one that best fits your needs.

A personal pension plan might also be worth looking into. For instance, a self-invested personal pension (SIPP) is a type of tax-efficient personal pension scheme that offers you access to a range of investments. This is useful as it gives you control over how your money is invested and what level of risk you want to accept.

If you are unsure about how to make your pension savings work hardest in your 50s then do seek guidance from a financial adviser. They can assess your situation and make a recommendation.

Clearing your mortgage and/or other debts

Carrying substantial debt into your retirement years can strain your income, reducing your ability to enjoy a comfortable and worry-free retirement. By clearing debts in your 50s or 60s, you could divert more of your income towards savings and investments, ensuring a more robust financial cushion for the future. 

Paying off your mortgage is a good example. It will bring peace of mind and free up a substantial portion of your monthly income to direct towards other financial goals, such as boosting your retirement savings. Eliminating debts such as credit cards and loans can also reduce the stress and anxiety that often comes with financial burdens.

Do be sure to weigh up all your options, however. For example, you may wish to keep some of your money aside for emergencies rather than using all of your savings to clear debt.  Also, you could be charged for paying off your mortgage early, so that’s something else to bear in mind. This is why you should think carefully before making any decisions and consider seeking financial advice.

Should you still have debt when you retire and lack the funds to clear it, there is a way to access the cash you need. If you have saved into a ‘defined contribution’ pension scheme, you can typically access up to 25% of the fund as a tax-free cash lump sum from age 55 (age 57 from April 2028).

You can use this money however you wish, and one option is to clear your mortgage or other debts for a debt-free retirement. But remember that the money you withdraw from your pension fund will reduce the amount you have left for your retirement.

Make a will

If you haven’t done so already, your 50s is a good time to arrange your will. This important document will help you to secure your family's future and ensure that your wishes are respected. By this age, many of us have significant assets and investments to our names. Your family may have grown bigger too, as grandchildren enter the scene. 

Having a will in place provides clarity for your family on how you want your estate to be divided. You can choose your beneficiaries and split your assets according to your wishes. For instance, you might want an heirloom item to go to a particular child or grandchild who you know will treasure it. 

Making a will not only reduces the risk of family disputes but also ensures that your loved ones are well taken care of after you're gone. In addition, a will can potentially help you to reduce inheritance tax liabilities, which could potentially save your estate thousands of pounds.

Think about downsizing

If you own a larger home, downsizing or moving to a less expensive area can potentially be a wise decision in your 50s. Smaller properties often have lower maintenance costs and can free up additional funds for retirement. You may even be able to pay off any remaining mortgage you have, which could make a huge difference to your retirement plans. 

Be sure to consider the potential costs and benefits before making your decision though. For example, the cost of stamp duty, moving home and doing any necessary work on your new home can add up quickly.

Life insurance

As you approach retirement, it is very important to review your insurance policies, such as life insurance and health insurance. You may have policies in place with your existing employer but will that end when you retire? If so, consider taking out your own policies to ensure that the right cover is in place to protect you and your family once you retire.

Reducing expenditure 

Creating and sticking to a budget is a key aspect of retirement planning. Make a list of your monthly expenses, and look for areas where you can cut costs. 

One supermarket tip from Martin Lewis is to drop a brand level when you do your shopping. Instead of buying your premium or finest items, try the value own-brands, or the saver options. You could cut hundreds or even thousands off your shopping bill each year. 

By redirecting your savings towards your pension pot, you won’t just boost your fund – you’ll adapt a more frugal lifestyle that will help your money to go further in retirement.

Speak to Retirement Line for annuity guidance

There’s a lot to consider and plan for when you are in your 50s and thinking ahead to your retirement. We hope the above information helps you as you work towards achieving your future financial goals for your golden years.

Remember, if you are 55+ and considering an annuity as a retirement income option, our friendly specialists are here to help. With their guidance you can better understand your annuity options and explore how much guaranteed income you could achieve from your pension fund.

Don’t delay, speak to our friendly team today on 0800 652 1316 or request a free call back by clicking here.

How much retirement income could you achieve from your pension fund? Use our free online annuity tool to find out.