‘Pretirement’ might sound like an early retirement, but it’s anything but.

In fact, ‘pretirement’ is a term coined to describe the act of easing into retirement; or working beyond State Retirement Age. This could be full-time, part-time, or on a consultancy basis.

Of those reaching the age of 65 in 2018, 50% will enter ‘pretirement’, instead of leaving work completely, according to Prudential.

Reasons for staying in work

You may be wondering why people would choose to work when the best part of reaching retirement age is the ability to go on unlimited holidays, focus your attention on the gardening and spending time with the grandchildren. The top four reasons given by those who are looking to continue working when they reach retirement age this year, are:

• Staying active and healthy, both in mind and body (54%).
• They enjoy their job and are not yet ready to leave (43%)
• Maintaining a routine and having a reason to leave the house (26%)

Unfortunately, for 12% of those who will be continuing to work after reaching 65, it is out of necessity, rather than choice, as they cannot afford to retire yet.

Stan Russell, a retirement income expert at Prudential, expands on this: “The shift to ‘pretirement’ in recent years shows that many people reaching State Pension age aren’t ready to stop working. Reducing hours, earning money from a hobby or changing jobs are all ways to wind down from working life gradually and for many to avoid boredom and maintain an active mind and body.

“However, not everyone has the luxury of choosing their retirement date due to their financial situation not allowing them to give up work and others may be forced to stop working for health reasons. Saving as much as possible as early as possible in their career is the best way for people to ensure they are financially well-prepared for a retirement that starts when they wish, or need, it to.”

Finding the ideal work-life balance

Those who will be reaching retirement age in 2018 are hoping to:

• Reduce their hours and go part-time with their current employer (26%): This will provide the free time to enjoy retirement, while continuing to work in a familiar space and maintain some of their former routine.
• Continue full-time in their current role (14%): If nothing changes, it may be sensible to delay your State Pension and increase the amount it pays in later years as a result.
• Try to earn a living from a hobby or start their own business (19%): For some, staying in their current job may not be a priority, but that doesn’t mean that work will end when they reach 65. Whether the aim is to generate some extra spending money, or to start a business which will provide a substantial income by itself, starting a business can be hard work at any age.

These could all be viable options for those who will continue working after the age of 65, whether it is by choice or not. But the true goal should be to put yourself in a position where you can work if you want to, but ultimately, your retirement is yours to enjoy as you wish.

In short, make sure that working in retirement is an option, not a necessity.

Taking control of your retirement planning

No matter what your dream retirement looks like, try to give yourself as much time as possible to put your financial plan into action.  This will involve:

1. Defining your retirement needs: Determine what your dream retirement looks like and define what you want to do, and what your ideal lifestyle will involve.

2. Calculating how much you will need to meet them: The cost of living in retirement will depend on the activities you want to take apart in and the lifestyle you are hoping to lead. The more lavish and exotic your dreams, the more money you will need to support that lifestyle.

3. Understanding your current position: Analyse how much you are currently putting away, look at your current pension fund value and forecast how much you will have available when you retire if you continue to prepare in the same way. Alternatively, talk to us and we can do all of that for you.

4. Finding ways to bridge the gap: If you will not have enough money to retire on your own terms, you will need to act sooner rather than later. The first option is to start making bigger contributions to your pension, which will help you to increase your fund in time to retire. Alternatively, you could choose to compromise on the lifestyle aspirations you have set for yourself.

While you may be planning to continue working in retirement to remain active and continue doing the things you love, it is important that the income gained from that is in fact, a bonus, rather than your main form of retirement income.

Having the flexibility to change your mind or adjust your plans if your circumstances change is invaluable. Therefore, you need to make sure that you have the retirement income available to support the lifestyle you want whether you continue earning or not.

The value of financial advice and planning

Seeking the opinion and help of a professional will enable you to see the bigger picture when it comes to retirement planning. By showing you the retirement lifestyle, you are on track for, and explaining the options facing you to reach the type of retirement you want, you can better understand your financial situation. You could also benefit from increased confidence in your financial decisions and feel secure in the knowledge that there are years of experience and qualifications supporting the decision you make.

To get started, feel free to get in touch with us.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.