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Retirement checklist

As you get closer to the age at which you want to stop working, work less, or change your working pattern, there will be some big decisions to make.

Here's a checklist to get you started in preparing for retirement:

Work out how much you've got in your pot

If you're not yet paying into a pension or making financial preparations for retirement - take a look at our pensions pages.

If you've been paying into a personal pension, your annual pension statement can tell you how much you've got and what size pension pot you can expect to end up with.

For your state pension, you will need to request a forecast of your state pension entitlement, which you can do on the Pensions Service website.

Take into account any savings, investments or other assets you may have. If it looks like you won't have enough to live on, you should consider taking steps such as boosting your National Insurance payments to make sure that you qualify for the full State Pension.

If you're looking to boost your retirement pot, downsizing your home, if it's big enough and you're a homeowner, could be an option. Moving to a smaller property can release equity to generate a retirement income or boost your savings. If you don't want to leave your home, equity release schemes allow you to stay put and free up some cash but this decreases the percentage of your home that you own.

If you're not sure of the best course of action you should seek professional financial advice.

Choose the right time to take your pension

There is no compulsory age for retirement, so when you start turning your pension pot into an income is up to you. You can even defer the State Pension, which in most cases will increase the amount that you're entitled to later.

Choosing the right time will depend on how much you have in your pension pot, the level of income you want to have in retirement and your life expectancy. You'll also need to know how you want to generate an income. For more information on your options visit our retirement income page.

Decide whether you want to take a tax-free lump sum

You can usually take up to 25% of your pension pot tax-free from the age of 55. Anything above this amount will be taxed at your usual rate of UK Income Tax.

Check in on debts

Your earnings in retirement will usually drop, and paying off any debt before you reach this point can help ease the pressure on your pocket.

If you can't afford to pay off all your debt before retirement, you should prioritise expensive debts (those that are costing you the most interest, not necessarily the largest monthly repayments).

Clearing debts will free up more of your retirement income for living costs and make planning simpler.

Reassess your savings and investments

As you approach retirement, you'll probably want to minimise risk on investments and make sure that your savings are earning as much as possible in interest.

The sooner you're going to need the money, the less time your investment will have to recover from any short-term losses. You may want to move some of your savings into safer options, like term deposit accounts or a Cash ISA. Consider how soon and how often you will need access to the money. Make sure that your savings are kept accessible in case you need them.

Work out a budget

Entering retirement and reducing your earnings means making some lifestyle adjustments. Once you've calculated how much income you're going to get, set a budget that accounts for how you're spending now and how your requirements may change over the coming years.

Work-related costs, like commuting, will obviously be down or gone but you may need to spend more on things like heating, healthcare and leisure. The MoneyHub tool can help you to keep track of all your income (including investments and pensions), set a budget, and see whether you're on track to meet it.

Next steps

The decisions you make about your retirement may be some of the most important financial choices of your life. You may want to speak to an financial advisor, who can give you expert advice tailored to your circumstances.

Last updated: 29 May 2015

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