Retirement planning: answers to the questions people ask most

There is no magic number. A good starting point is working out what you expect to spend on essentials, the things that make retirement enjoyable and larger one-off costs such as home improvements, a new car or supporting family. Then compare that with your likely income from the State Pension, workplace pensions, personal pensions, savings, investments, property or business proceeds. A cashflow model will help test whether those resources will fully support your plans over time.

The earlier the better. Planning years ahead gives you time to understand your pensions, adjust contributions, build cash savings and decide how investments should be positioned. Retirement planning should be a series of informed choices that can be reviewed as life changes, rather than one big leap into the unknown.

The answer to this question doesn't have to be either/or. An annuity can provide guaranteed income. Pension drawdown keeps money invested and allows flexible withdrawals but carries investment risk. Some people use annuities to meet essential costs and keep other assets more flexible. The right balance depends on your spending needs, other income, health, family circumstances and attitude to risk.

Not necessarily. A lump sum can be useful if you have a clear purpose, such as clearing debt, making a planned purchase or holding a cash reserve. But taking money simply because it is available can reduce what remains invested for future income.  

Furthermore, seeing your tax-free cash entitlement as a form of tax-free income to be taken over time can be an attractive way to boost regular net income over time.  

Before withdrawing, consider what you will use it for, where you will hold it and how it affects your wider plan.

Unsurprisingly there is no fixed sum that will work for everyone. Your retirement cash reserve should be sufficient to serve the following purposes:

• To meet realistic, conceivable emergency needs (i.e. significant home repairs, medical costs etc.)
• To cover regular income that is met from invested sources for a two to three-year period. This should enable you to turn off reliance on invested assets during times of significant market downturn, thereby preserving the long-term value of the fund.

A secondary question is then what to do with this cash reserve and the answer usually centres on maximising returns whilst also being tax-efficient.

This is one of the most common notions we hear in conversations with clients, and our view is that reaching retirement does not automatically mean you should de-risk.

Investment risk decisions should be driven by your underlying attitude to investment risk (i.e. how comfortable you are with the ups and downs of the investment markets) and your capacity for risk (i.e. how resilient your financial position is to those ups and downs). For example, someone with a sizeable, guaranteed pension income that covers most or all of their needs is likely to be able to adopt a higher investment risk profile than someone with no guaranteed income and no retirement cash reserve.

A fall can be alarming once you start taking income, but it's important not to make snap decisions now that could have limit your income longer-term. Selling investments after they have dropped may make recovery harder, so your plan should not rely on markets behaving smoothly every year. Cash reserves, guaranteed income and a sensible withdrawal strategy can help reduce the long-term impact of market downturns.

Start with your own security - give yourself a few years of retirement to understand how your retirement needs will develop. Helping family can be rewarding, but a gift that feels affordable today may look different if your income needs rise or you later face care costs. Financial modelling can help identify whether a gift is affordable before you make it, helping you be generous with a clearer view of the consequences.

Yes, but balanced against funding the life you've worked hard to enjoy. Nobody knows whether they will need care, what form it will take or how long it will last. A sensible plan considers what resources could be available and whether someone you trust understands your finances if managing them becomes difficult.

If you have an adviser then a full review once a year is a base rhythm for many people, with extra touch points when something important changes or around the end of a tax year, for example.  

As you get closer to the point of retirement, you should be meeting more regularly to undertake last minute planning (such as final contributions), establish a plan for the early months of retirement, and executing any associated administration.  

If you choose to self-manage your retirement, you should be reviewing your positioning more regularly to ensure you remain invested appropriately and to consider any announced or upcoming regulatory or tax changes.