May 20th, 2022

What is “flexi-retirement” and could it work for you?

If you are approaching the end of your working life, or perhaps in the early stages of your retirement, the cost of living crisis might be particularly concerning to you.

Indeed, UK inflation reached 9% in May 2022, causing some retirees to feel worried about the spending power of their pension pot. What’s more, the Bank of England (BoE) also raised the base rate to 1% in May, meaning borrowing could be more expensive, too.

You can read our insights on inflation to learn about why inflation has risen in recent months, and how it could affect your wealth.

When considering the longevity of your later-life income, the important thing to remember is not to panic. Although the cost of living is rising, there are ways you can readjust your retirement lifestyle, with the help of your financial planner, to maintain a sustainable retirement income.

One route some retirees are taking at this time is to explore “flexi-retirement”. According to Professional Adviser, two-thirds of people retiring in 2022 plan to stay in some form of work – up from 56% in 2021, and only 34% in 2020.

Under the current circumstances, it makes sense that you might be exploring work options in later life. However, flexi-retirement may not prove viable for your situation, if you have other responsibilities taking priority at this stage in your life.

Read on to find out two key benefits of flexi-retirement, so you can better determine whether this set-up might work for you.

Flexi-retirement could help you maintain a comfortable lifestyle later in life

Of course, one of the main drives behind maintaining some form of employment in retirement could be earning a supplementary income.

A Which? survey found that the average retired household with two people spend around £2,170 a month, totalling approximately £26,000 a year. Your expenditure will depend on your unique circumstances – you could still be paying your mortgage; have young adult children depending on you financially; or be caring for elderly parents in retirement.

Indeed, a MoneyAge study confirmed that more than one-third of newly retired people have financial dependants, averaging £3,700 a year spent on caring for others. If this situation rings true for you, you could feel concerned about drawing a sustainable retirement income in the long term.

What’s more, the State Pension Age is increasing. As of 2028, State Pension Age will increase from 66 to 67. So, you may wish to retire before you are able to access your State Pension, potentially creating a need for supplementary income.

Compounded with the current cost of living crisis, you could feel that continuing to work part-time as you enter retirement might be beneficial.

For a full review of your circumstances as you enter retirement, it could be highly beneficial to speak to your financial planner. We can help you calculate how much you need to draw from your pension to maintain a comfortable lifestyle, and provide guidance on later-life work too.

Flexi-retirement could allow you to maintain valuable social contact

Not only could flexi-retirement help you financially, but it could also provide much-needed social contact as you enter this next stage in your life.

A 2022 survey by Age UK found that 1.4 million older people are often lonely. Since the Covid-19 lockdowns, some retirees are finding it difficult to maintain social contact, which could lead to symptoms of depression in the long term.

If you feel you want to maintain social contact as you enter retirement, it could be constructive to explore work options that allow you to collaborate and socialise with other people.

This way, you could earn a supplementary income, while also taking care of your mental health in the process.

Your financial planner can help you determine if flexi-retirement is right for you

While flexi-retirement can be a great option for many, everyone is different. If you have worked hard all your life in a high-pressure environment, the idea of returning to work in retirement might not be pleasing to you.

Likewise, you might have caring responsibilities for elderly parents, or decide to put your time into voluntary roles once you stop work.

Discussing your retirement dreams and goals with your financial planner could help you determine whether a flexi-retirement situation could benefit you. Plus, your financial planner can advise you on a tax-efficient pension withdrawal, which could help you save money as you head into your later years.

Get in touch

For guidance on retirement or any other financial matters, email enquiries@prosserknowles.co.uk or click here to request a call back from one of our advisers.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

 

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