As the retirement age increases, how can you get better prepared for the future? (Part 2)

During the previous blog post, we discussed how to make a ‘back of the envelop’ calculation of potential income after retirement versus future expenses. Most of us will be shocked by the findings.  We will realize that we will either have to adjust our standards or make corrective actions in the next few years in order to maintain a similar lifestyle.

I would personally prefer the latter. Hence, I will share with you some suggestions on how to increase the income (inflows) after retirement.

Here are my key suggestions:

  • Make sure you fulfill the conditions to get the full basic State Pension. If you live in the UK, you need a total of 30 qualifying years of National Insurance contributions or credits in order to be eligible for the full basic State Pension. In order to find out whether you have any gaps on your state pension contributions and whether you can pay voluntary contributions to fill these gaps, pls refer to the site.
  • Check if you employer offers you the option to match your contributions (i.e. offers to pay more to your pension pot, if you agree to increase your contributions to the scheme too).
  • Capitalize on any tax-efficient additional pension contributions to
    Pensions, retirement, additional pension contributions, financial planning

    Small actions now can have a big impact later on

    private pension schemes.  In many countries, you can receive tax relief for your additional contributions up to a specific amount. In the UK, you can also carry forward any unused annual allowance for tax relief on pension savings from the previous 3 tax years. You can find more information at the HM& Customs Site. It might also be useful to get financial advice. These regulations are complex and change often.

 Note: you cannot have access to your pension pot until later in life. You need to be aware of this when you do your financial planning. Also, remember that the pension you will receive is normally treated as earned income and you will be liable to income tax – but possibly at a much lower rate versus now.

Make investments that will provide you additional income after retirement. 
For example, you can invest in a buy-to-let property. If the rent you receive by then is higher than the related expenses, it will be an additional income. In case the property appreciates, you can also have the option to sell it. Like with every investment,  make the necessary due-diligence before moving ahead.

  • Finally, remember that it is possible to continue working after retirement age. Nowadays, people live longer and want to have interesting lives and add value to the society. It doesn’t necessarily mean that you have a full time job. Part-time options or consulting can be possible. I have a friend in her early seventies who works as an elections observer for international organizations. She does 2-3 missions per year where she uses her business skills and experience for a good cause. She is a true inspiration to me. So, we can all re-invent ourselves for a second or third career path later in our life.

The bottom line: The earlier you start planning your finances regarding your retirement the better it is. Small actions now can have a big impact later on.

(If you want to get financial advice tailored to your needs, please find an authorised financial advisor in your country. This blog is to help you understand the situation you will face and encourage you to do something about it now.)

Korina Karampela is the founder of b4iapply. She passionately believes in empowering people to  make informed decisions about their career and their finances. She is a senior executive in the pharmaceutical industry and has an MBA from MIT Sloan. In her limited spare time, she provides pro-bono career advice. Her b4iapply blog is recommended by The Guardian for professional development. 

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