It’s not surprising to hear that your workplace pension probably won’t be enough to fund your retirement, however, with the added factor of the ongoing cost-of-living crisis, the risk of your money being depleted quicker is a lot higher.

Now, this isn’t going to apply to everyone and will greatly depend on individual circumstances, but the chances are that you will be affected by certain roadblocks, be it before or after you’ve retired, at some point.

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Many factors have contributed to the increasing level of inflation in the UK and in turn, have amplified the cost-of-living crisis that we’re facing. 

Whether you’re far away from retirement, approaching it, or in the midst of it, through increasing energy bills or expensive food shops, many households are under more financial pressure and are having to tighten their budgets, and as such, are causing our pension pot contributions to take a hit or be tapped into.

However, with some careful and guided planning, plus help from a financial adviser, you’ll be able to put yourself in the best position possible to make sure you have enough money to last you throughout retirement despite the tricky times we’re facing.

How to avoid running out of money at retirement

No one can predict how many more journeys around the sun they may have, or what financial factors may pop up down the line, and as such, knowing how much money you will need to fund your later years, or how and when you will need to withdraw money, is hard to put your finger on. 

This can make retirement planning more complicated, however, it also highlights just how important it is to do it, whether you’re approaching retirement or are in your golden years.

So, what steps should you take?

1. Understand what type of pension you have and the decisions that come along with it

There are several types of pension and it’s important to understand what you have and the decisions involved with it to make sure that you are making the best choices for you and your circumstances. 

Nowadays, most people will have a defined contribution pension scheme and as such will solely need to navigate drawing their own income.

Defined Contribution Pension Schemes are workplace pension schemes where both you and your employer’s contributions are invested and the proceeds are then used to buy a pension or pension pot based on how much you’ve paid in.

However, some people may have a defined benefit pension instead where they are guaranteed a specific income.

Defined Benefit Pensions are usually a workplace pension pot based on your salary and how long you’ve worked for your employer.

Each type of pension will involve having to make decisions that can be life-changing and will often be what determines how comfortably you can live in retirement or how much funds you will have available.

If you’re confused about what type of pension you have or want to seek advice on important decisions that you need to make, why not consider consulting a financial adviser who will be able to help?

2. Don’t be tempted to withdraw money early or in times of need

As we’ve already mentioned, with times getting harder pre-retirement, it’s easy to fall into the trap of taking out too much money when you stop working to account for the payment increases in utility bills and other necessary costs.

However, where possible you should only withdraw what is needed. Otherwise, your future income may take a huge hit.

The more money you take out, the harder it will be to recover, much like it is to keep on top of borrowing money!

Generally speaking, advisers suggest that you withdraw just 4% from your pension pot to begin with which can then be increased with inflation each year after that, at a sustainable rate.

However, again, this will greatly depend on the value of your pension pot and your individual circumstances. 

If you’re ever unsure of what steps to take, make sure you contact an experienced financial adviser who will always consider your financial situation before making any suggestions.

3. Adopt an appropriate retirement strategy 

Choosing the right retirement strategy can make a huge difference in the pool of finance you have available later on in life, so it’s important that you make the best decision for you.

By talking to a financial adviser, they will be able to consider your needs and suggest retirement strategies that will work for you and make the most of your money. 

They may suggest that under careful guidance you should adopt a diversified retirement approach that can allow your investments to adapt to your changing needs throughout your retirement.

It will typically involve splitting your portfolio into investments with different risk levels that target different aims or requirements and can help to increase the income you start with.

However, as with all investments, it’s important to pay attention to volatility which an adviser will be able to help you navigate.

Adopting the most appropriate strategy will reduce the chance of running out of money in retirement, however, the best port of call will differ from person to person, so it’s important that you seek the help of a financial adviser.

4. Talk to an adviser – prepare, plan, and review

Navigating and understanding your finances (even outside of retirement) can get confusing and feel overwhelming. And arguably, become even more so when you are wanting to plan for your later years.

Financial advisers can be a helping hand throughout your financial life and when it comes to your pension and planning for retirement they can discuss your pension options with you, take a closer look at your finances and make necessary suggestions to ensure that you’ll be in the best financial position possible in later life.

They’ll help you make the best-educated decisions and make sure you fully understand your options.

They can also give you regular reviews, taking into account any changes that may occur throughout the year, and make sure you act accordingly, reducing the risk of making decisions that could affect the amount of money you have to play around with. 

Final thoughts

It’s impossible to know exactly how much money you will need to fund your retirement, and with the added knock-on impact of the cost-of-living crisis, it’s now more important than ever that you make the necessary plans and talk to an adviser to make sure you’re prepared for all eventualities and to make sure you don’t run out of money prematurely.

To get started with a financial adviser today, why not get in touch with our team of independent, experienced, and friendly financial advisers.

Coffey Brooks are a team of Independent Financial and Mortgage Advisers based in Clacton-On-Sea, Essex and are directly authorised and regulated by the Financial Conduct Authority.

Disclaimer – This article and the information it contains are correct and accurate to the best of our knowledge. However, it is not a recommendation to pursue certain strategies or a guide to follow. Please consult a qualified and experienced financial adviser who will consider your personal circumstances and suggest relevant solutions.