There’s plenty to think about in later life when it comes to money. Insurance, retirement pensions, funeral plans, bills, and much more can seem overwhelming. Nevertheless, it’s important to monitor and manage our money, particularly when we’re heading into later life.
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Everyone’s circumstances are different but it’s still essential to work out a realistic financial plan. To help you plan for your future, or the future of a loved one, here are some financial tips for older people.
Plan Your Pension Income
Once you retire, most of your income is likely to come from a mix of private and state pensions.
State Pension is a regular income that most people can receive. Currently, the amount is £185.15 per week. It is paid every four weeks into an account of your choice. How much you will receive depends on your National Insurance contributions, additional entitlements, and whether you choose to defer taking your pension or not.
Private pensions are a way for you and your employer to put cash aside for your retirement. Most people contribute to a private pension via a workplace scheme. Alternatively, they might do it via a Self-Invested Personal Pension (SIPP).
It’s never too late to start a pension. Ideally, you should start saving as soon as possible. That way, your pension will have more time to accrue value. When you retire, you’ll be able to withdraw money from your pension pot as a tax-free lump sum. This is generally 25% of your total pension fund. You then have the option to buy an annuity which will provide a guaranteed taxable income for the rest of your life. The other option is to reinvest the remaining funds so you’ve got a flexible, regular income. This option is called a pension drawdown.
Know Your Benefits
You may find a little extra money very helpful, so it pays to check whether you’ll be eligible for any government benefits. Some of the benefits you need to be aware of include:
- Attendance Allowance
- Carer’s Allowance
- Age-Related Help
- Disability Living Allowance
- Personal Independence Payment
- Bereavement Support Payment
If you want more information about any of these benefits, the Citizens Advice website is a good place to visit.
Save Money On Your Bills
Nobody likes paying bills but they’re a fact of life. For older people and their loved ones, they can also be a big worry. Certain expenses can’t be avoided such as energy bills, rent or mortgage, and food bills.
Most people will have less income after retirement, so it’s important to work out where you can save money.
You can save on your energy bills by getting the best deal, such as a fixed-rate energy tariff. Some energy companies also offer discounts if you take out gas and electricity with them. It might also help to compare prices using an online price comparison tool.
Other tips for reducing your energy bills include:
- Turning off lights when you leave a room
- Turning down your thermostat by one degree
- Insulating your loft
- Unplugging your TV and other electrical items when not in use.
Think About Investments
You can secure yourself a steady income or a lump sum after retirement with some smart investments. Important things to consider include:
- Risk: A savings account is the safest bet but the interest rate isn’t likely to beat inflation. Investing some of your money could be risky but it could lead to a valuable income stream.
- Types of funds: if you’re looking for a steady interest rate over several years, low-risk bonds such as Gilts issued by the government are the best bet.
- Diversity: It’s smart to spread your money between different kinds of investments.
Write Your Will And Arrange Your Power Of Attorney
The importance of writing a will can’t be overstated. It’s something everyone should consider especially if you have children or other dependents. Your will determines where your assets and finances go after you die.
A Power of Attorney is a legal document that allows a representative to make decisions on your behalf should you become unable to do so.
Paying For Your Funeral
Talking about funerals can be upsetting and uncomfortable and they are also quite expensive. It is possible to pay for your funeral in advance with a funeral plan. Alternatively, you might choose to leave money as part of your will, specifically for the ceremony.
Finance For Care
Care costs can be very expensive and it’s a good idea to get a head start. You never know what’s going to happen in the future, which makes planning for care difficult. It’s worth noting that nearly 80% of older people will need some sort of care by the time they reach 80.
Working out how to put money aside can be challenging, but if it helps you stay independent in your own home it’ll be worth it.