Usually in our 60s, we reach the third act of our lives. For many of us, this is when we close the chapter of our careers. Others may never fully retire but will enter a new phase with a different work-life balance. We’ve already achieved many of our financial goals and our priorities tend to shift as, typically, we no longer need to focus on accumulating wealth.

However, there can still be a different set of challenges ahead, and retirement is a far longer life stage than it used to be. Careful financial planning can give you greater flexibility to enjoy these years, safe in the knowledge that you’ll be able to adapt to changing circumstances and navigate whatever life throws at you.

Here are three of the most important financial considerations in later life and how financial planning can help.  

Managing your retirement income

According to independent research by Loughborough University and the Pensions and Lifetime Savings Association (PLSA), the benchmark for a moderate standard of living in retirement as of 2021 is £20,800 a year for a single person and £30,600 for a couple.

While this is a helpful guide, everyone’s income requirements are different, and they can change over the years. These days, many people want to take a flexible income. For example, you might want your income to be highest in the early years of retirement, so you can travel or indulge in a new hobby. Or you might be continuing to work in some form, so you’ll want your pension income to increase later.

The pension reforms of 2015 enable much more flexibility in planning and adapting to your changing income requirements. Among other things, this means that anyone over 55 (increasing to 57 in 2028) with a defined contribution pension can choose when and how to take their pension income and can leave their pension invested until they need it.

So, you can work with a financial planner to forecast your spending throughout your retirement, deciding how much to withdraw now and how much to leave invested for the future. 

Planning for potential care costs

Many of us will eventually need later life care in some form (for ourselves or someone we love), whether that’s informal care carried out by a spouse or relative or more formal care offered by professionals (which can cost over £1,600 a week).

When that time comes, being financially prepared increases the number of care options open to you. There are various ways to plan to cover these costs, including:

  • Purchasing an immediate care plan (i.e. a long-term care insurance policy)
  • Using your existing savings
  • Investing a lump sum and using the investment returns
  • Releasing equity from your home
  • Seeking a deferred payment agreement with your local council
  • Renting or selling your property

A financial planner can help you compare your options and, if you’re investing to pay for care fees, they can help to ensure that your investments deliver the income you’ll need.

Leaving a legacy

If you have younger relatives, it’s natural to want to help them financially after you’re gone. Since the standard rate of inheritance tax is 40%, passing on your wealth often requires careful planning to reduce the amount of inheritance tax payable. There are various allowances, reliefs, and strategies you can use to do this.

To help to reduce your inheritance tax liability, you can:

  • Make a will, and keep it up to date, to ensure your assets are distributed to your loved ones as quickly and efficiently as possible
  • Give lifetime gifts, within HMRC’s rules on gift-giving
  • Invest in schemes which offer tax incentives for new investors. The assets involved qualify for 100% inheritance tax relief if held for two years.
  • Consider trusts. These can play an important part in inheritance tax planning and can be used as part of a holistic financial plan.
  • Set up whole-of-life plans to cover some or all of your inheritance tax liability.

A financial planner can help you to navigate the complex world of inheritance tax and identify which tax reduction strategies could work in your specific circumstances.

If you’d like to speak to a financial planner about retirement planning, inheritance tax planning, long-term care, or any other later-life concerns, you can contact the team in our Guildford office.

About the author

To contact or read more about Faye Church, visit her biography here.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.