The retirement income conundrum

Assets are nice to have but it’s income which pays the bills, literally.  This reality may pose something of a conundrum for modern retirees who could find themselves in a situation where they have a high net worth on paper, but poor cash flow, with the result that although they are technically well-off, in actual fact, they may struggle to pay their bills.  Here are some suggestions to help address this situation. Make the most of your pension pot Even if you have already taken out an annuity, you may be able to cancel it and take an alternative approach.  It is, however, strongly recommended to get financial advice before taking such a major step.  If you have not yet taken out an annuity, then you will want to make sure that you take the right decisions with your hard-earned pension pot every step of the way throughout your retirement.  Again, this is where professional advice can be invaluable. Either downsize or make the most of the space you have Accommodation can be a tricky subject for retirees.  Some may be comfortable in their established family home or, at least, not see anywhere better, in which case their immediate preference may be to stay put.  Those who opt to do so should, however, be aware that this carries risks.  Perhaps the most obvious risk is that property prices will go down so that you will get less for your home if you decide to sell it or release equity from it.  In the former case, you should also expect to pay less for your next home, but this does not apply in the latter.  A less obvious, but still potentially significant risk, is political trends.  For example, the government could change the tax system to make it more expensive for people to stay in houses which are held to be under-occupied.  If you do wish to stay in your current home, you may could look at ways to make the most of any extra space you have, for example, unused bedrooms vacated by adult children could be used by lodgers even if only for part of the year. See if you can still work in some capacity You may not want to go back to “working nine to five”, but there may still be ways you could earn a cash income, such as joining the gig economy or monetising a hobby.  This may not be a great income or even an income on which you could live without touching your retirement savings, but it would be extra money and if you earned it doing something you enjoy, it would be fun too. Be strategic with your cash savings Most of us need to keep some cash savings ready to hand if only as an emergency fund and although interest rates are still at less than 1% (plus savings interest can be taxed), as the old saying goes, “look after your pennies and your pounds will take care of themselves).  While you will probably want to avoid bouncing around between banks if only for your convenience, you should certainly keep your eyes open for anyone who is offering an especially good deal and, in particular, see if it would be worthwhile for you to keep your cash savings in an ISA wrapper to minimise your tax liability. Keep setting aside investment income if you possibly can Try to keep making savings from your pension (and/or other income) so you can carry on investing for your future and so that you have the potential to leave a legacy behind you, even if you don’t have children, you may still have family and friends or at least causes you wish to support. For pension, investments advice and tax planning we act as introducers only.