When clients approach us to help plan a successful retirement, we consider with them a wide range of options in respect of their pension pots.
One option clients are often surprised to hear about is deferring the use of pension income; waiting until a later date before drawing capital and income from this source of money.
Some new research from pension provider Aegon suggests this pensions patience can pay off.
Aegon found that those approaching age 65 can boost their pension income by two-thirds by deferring their retirement by 5 years.
This could result in adding an average of £46,388 to pension savings as a result of the delay.
This means a 65 year old could increase their monthly income by £314 from £457 to £771 per month if they defer retirement and keep contributing to their personal or workplace pension until age 70.
Those who delay by three years to age 68 can build up an extra £25,542 increasing their monthly income by £164.
Changing work patterns, questions over the generosity of the future of the state pension, and the need to supplement retirement income means that people are working longer into ‘traditional’ retirement than before, either because they need to or simply because they want to.
Waiting until age 70 to ‘retire’ is not all that unusual, especially if you are in good health and doing work you enjoy.
An approach we always advocate here at Informed Choice is to allow your goals and objectives to lead retirement decisions, and then understand the affordability through the process of lifetime cash flow forecasting.
Very often we engage with clients who plan to retire at age 65 or 70, but discover they can afford to stop working much earlier.
This confidence that money will not run out during their lifetime (based on a series of sensible assumptions) offers freedom to make choices around work, volunteering and leisure time.
If you do wish to continue working throughout your 60s, or discover that the retirement you want is unaffordable at the moment, then pensions patience is an option to consider.
