What Do To When You Are Approaching Retirement

Copyright (c) 2011 Robert Gray

When you reach the age when you are approaching retirement there are considerations and decisions to be made. Retirement is not deemed to be as straightforward as it used to be and workers need to think carefully about the age at which they would like to, and can afford to, retire, the options available to them and to address their current and future financial state of affairs. This article looks at whether you have a choice about when you retire, what should affect this decision, and the options available to you if you want to either take early retirement or work beyond your normal retirement age.

Your 'State Pension Age' refers to the earliest age at which you can take your state pension. This age is set by the government and is subject to change. Workers have a choice as to whether to take early retirement (i.e. stop working before they reach their state pension age), stop working when they reach their state pension age or continue working beyond their state pension age. The former and latter of these options do have financial implications as far as their state pension is concerned and could also have implications relating to any private company pension.

Your state pension is calculated on the number of years you have paid your National Insurance contributions. Therefore, if you choose to stop working before you reach your state pension age the amount you will receive by way of a state pension is likely to be less in the long run than if you have continued to work up to your state pension age. Alternatively, you may benefit if you decide to defer your state pension and keep working beyond your state pension age (although you do have the option, once you reach your state pension age, to carry on working and claim your state pension). If you put off claiming your state pension for at least 5 weeks you could earn extra state pension each week and, similarly, if you defer taking your state pension continuously for at least one year you could earn a lump sum. It is important that you check any private pension scheme you have to check the implications on this scheme if you either decide to retire early or continue working beyond your state pension age.

Making a decision about what age to retire at is not a decision to be taken lightly. A lot will depend on your financial affairs and what provisions you have made for your retirement. You will also need to consider issues other than financial ones, such as whether you are going to be 'suited' to permanent retirement or whether you would, perhaps, prefer to work part-time instead. If you are unsure about which direction to take as you approach retirement you should seek advice from an independent financial advisor who will be able to give you the information you require to assist you with your decision.


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