Preparing for Retirement: Top Tips for Making Money-Smart Moves

For many in the UK, retirement is an anxious time. On the one hand, you can’t wait until you can stop working. On the other, you’re worried about living on a fixed income. You worry about your pension, your personal savings, your insurance, and what you’ll do about rising healthcare costs.

Here’s what you need to know to make smarter money moves and survive when it’s time to hang up your work shirt forever.

Scoping Out Your State Pension – What You Need To Know

Your state pension is the minimum amount of money you’re entitled to during your retirement. You can claim a state pension when you reach your state pension age. Check out when you’ll reach that age on Gov.UK’s state pension calculator.

You can also consider putting off your claim if you want to stay working longer. This deferral of your pension accumulates your pension benefits until you’re ready to retire.

Buy More Life Insurance

Most people don’t think of buying life insurance as a retirement strategy, but it’s a secret that big banks and hedge funds employ all the time. For the individual retiree, the reasoning stems from a somewhat forgotten approach to financial planning taught by Dr. Solomon Stephen Huebner at the Wharton School of the University of Pennsylvania in America, during the early 1900s.

His concept of Human Life Value stated that an individual should purchase permanent life insurance to fully insure the value of his life – forever – and that human life is the ultimate property, and source of all other properties, which needs infinite protection.

Just as one does not ever reduce the amount of home insurance, auto insurance, or liability insurance over time, regardless of one’s bank account size, one should never reduce the amount of life insurance in force on one’s life.

And, because permanent life insurance includes cash surrender values, it can be used to supplement your pension benefits at retirement.

The cash values in a life insurance policy grow at guaranteed rates, are tax-free, and participating or “with profits” policies pay dividends which may be used to supplement other income sources.

If structured properly (you should talk to a life insurance agent about this), your policy will provide significant protection against stock market losses or corrections, give you options to draw an income during a recession or depression, and the savings component of permanent insurance is accessible for any reason during your lifetime.

Consider a Lump Sum Annuity

When you retire, it’s tempting to take your pension as a lump sum. And, in the UK, you can withdraw up to 25% of your pension pot for this purpose. But, what should you do with it? That depends on your total financial plan.

However, a popular option is to annuitize the lump sum.

Annuitization means that you exchange your savings for guaranteed monthly income. You no longer have access to that savings, but you do have an income you cannot outlive.

Make Smart Cuts

The important thing here is to make cuts in your lifestyle that will not interfere with your long-term goals or activities which you have been planning a lifetime for. Many people get to retirement and suffer from a condition where they are tasked with reducing their lifestyle.

This is something that most people find unappealing for obvious reasons. Because you’re not making an income subject to regular raises anymore, some smart cuts are in order. But, those cuts shouldn’t interfere with your ideal life.

In most cases, this requires a little creativity. If part of your retirement plan was to travel, for example, you could compromise on the size of your home, selling it and rent a flat in a low-cost neighbourhood.

Or, at least buy a smaller home.

Then, you could travel in relative freedom with the money from the sale of the house, or at least part of that money.

Another way to save money would be to not travel. If travelling wasn’t part of your retirement dream, then you could work on other ways to cut expenses. You could still downsize your home, but perhaps you could also buy a bicycle and sell your vehicle.

This will help you stay active and reduce transportation costs.

If you can’t ride everyday, you could downsize your vehicle by buying an older model or work out a ride-sharing agreement with a friend of relative. Or, pay for ride-sharing through any of the popular ride-sharing services on the market now.

Joel Rowe works in the personal finance industry within the pensions sector. He has growing concerns on the futures of baby boomers and likes to write on the topic in the hopes of helping people live better lives once they reach retirement.

Are you an account whore?

So the motivation for this post came from J’s post yesterday about about ING’s sub-accounts. I am a very happy customer of ING, especially after switching from evil Bank of America.  I shamelessly promote ING to anyone that asks where they should keep their money. You’d think ING was paying me to say all these wonderful things, they aren’t, but I wouldn’t mind it if they did (ya hear that ING…hook a ninja up!).

With ING, you can have multiple accounts, and label them different things. For example, I have an Emergency Fund, a Wedding Fund, and an “Extra Savings” fund. A lot of people think these sub-accounts are all part of their primary ING savings account. Those people are wrong. Each sub-account is actually a new account. So while some people may think they only have one account with ING, they actually have 2, 3, 4, or more.

While ING does make having multiple savings accounts easy, it also makes me want to create a bajillion more accounts. Just think I could have a “Big screen TV” fund, a “Vacation” fund. and a “Don’t tell Girl Ninja about this money” fund. With all of these new possibilties I’ve come to realize something: I think I might need to join A.A. No, not not Alcoholics Anonymous, but Accounts Anonymous. I’ll be the first to admit it…Yes, that’s right. I’m a bank account whore. It’s kind of scary when I think about it. My personal information isn’t so “personal” when I have accounts with a zillion different companies. Here’s my current account stats…

Savings Accounts: 3 accounts (all ING)

Checking Accounts: 2 accounts (ING/Chase)

Retirement Accounts: 2 accounts (Wells Fargo/Employer)

Credit Cards: 3 accounts (BoA, Chase, Employer)

To further fuel my addiction, I got an envelope from Chase today saying they will give me $100 if I open a money market savings account with them. I think I’m gonna have to open up the account. Deposit the minimum balance necessary to qualify for the promotion ($5,000). Keep money in the account for the 10 days it takes to receive the $100 bonus. After 10 days, withdraw all money from Chase . Put money back in to ING. Close my Chase money market account. Send Chase a letter saying “How ya like them apples?”

I have a total of 10 different accounts, soon to be 11. At least one person confessed to 9 different savings accounts on J’s post (I can’t imagine how many TOTAL accounts they have). How many accounts are you sleeping around with? Can anyone out there beat 20?