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How to plan for retirement: From getting the most out of State Pension to paying taxes

Families preparing for their retirement years have been urged to gen up on their state pension and how their taxes will work.

Felicia Hjertman, founder and CEO of investment platform TILLIT, said people may need a “regular review” of their finances as they transition into retirement.

She spoke to Express.co.uk about some “key considerations” for your finances when moving into retirement.

She said: “First, make sure you understand your eligibility for the state pension. Your National Insurance contributions record plays a notable role in determining your entitlement.

“You should be able to obtain a personal forecast from the government to estimate your state pension amount. You should be able to do this through the HMRC app.”

State pension payments increased 8.5 percent from this month, with the full new state pension now paying £221.20 a week.

The second important step Ms Hjertman recommended is to review your private pensions as well as your savings and investments.

She said this is vital “to understand how much you have and how much of it can contribute to your retirement income”.

The expert said: “If you are married, it is important to look at your retirement savings as a whole. Mortgage payments also play a key role and if you are a renter, then it’s even more important that you accumulate as much savings as you can before you retire when your traditional income-generating capacity ends.”

Next on the agenda is to make sure you understand what taxes you will be liable for during your retirement years.

Ms Hjertman explained: “Ensure you understand the tax implications based on the overall income you receive from your state and private pensions and how that may impact your income tax rate in retirement or any means-tested state benefits you may be entitled to.

Finally, you also have to look at how you want to live when you retire and the costs associated with that lifestyle. What do your holiday and travel plans look like?

“Is your current home your forever home or might you want/have to move in the future? Are you thinking of pursuing some new hobbies? A good starting point is to create a budget and factor all these considerations into your planning.”

She said it’s important to carry out these actions as there can be a lot involved in the process.

The investment expert commented: “There are some big and important decisions to make as you approach retirement to make sure you are in as a resilient position as you can be.

“Not only are there complex financial decisions to be made, but studies also show how we (sometimes significantly) underestimate our life expectancy.

“So not only do you need to make sure you have enough to retire, you need to be sure you have enough to last, which for many can be another two decades (sometimes more).”

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