5 things you need to consider before deciding to withdraw money from your pot
Following pension reforms from age 55 – rising to age 57 from 2028 unless your plan has a protected pension age, you can start using the money you’ve saved in your pension. But there’s a lot to think about when you withdraw money from a pension.
There are some exceptions that entitle you to access your pension earlier, but you may have to pay high fees. Whatever age you decide to withdraw your pension, there are a few things you’ll need to consider.
Top 5 things to consider before withdrawing money from your pension
1. Pensions freedoms: Familiarise yourself with the pensions freedoms so you are aware of your options.
You can now do a lot more with your pension pot than previously. Everyoneis different and it is important to find the right solution for your circumstances. What risks are you willing to take?
2. Saving requirements: Consider the amount of money you will need each month to maintain your lifestyle. Ask yourself: How much might I need? How much might I get? Do I still have a mortgage to pay off? What other sources of income do I have, and do I need my pension to keep up with inflation? Could I consider working for longer? Do I want to have annual holidays?
3. Costs later in retirement: Think about costs later in your retirement. What will your living costs be in the future? Care needs are not a subject we are comfortable thinking about but it is important to have conversations about it with your family, as well as Powers of Attorney, Wills and inheritance.
4. Health and life expectancy: We often vastly underestimate this, but evidence shows we are mostly living longer, with a growing variation in healthy life expectancy. If you have a partner, do you need to provide for them financially after you die, or are you relying on them?
5. Obtain professional financial advice: Few of us may expect to give up work altogether in our 50s. But a growing number of us are dipping into our pension before retirement age. Before we get into the different ways you could withdraw money, there are some more general things to think about first. Try asking yourself the following questions: How long will I need my money to last? How long do I want to keep working? How much tax might I pay? Could my health and lifestyle affect what I get? How much do I want to leave behind?