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Financial responsibilities during retirement

Hi Folks,

Please welcome today’s guest author, Chris Picnicpr. As you can tell Chris is a Brit but the valuable information he is presenting here applies to the citizens of all developed countries.

I do not want to be a doom and gloom-er but the fact is that this recession will continue to affect seniors and retirees long after good times have returned for others. Most of us seniors and retirees will have to be on the alert for ways to cope with our finances for the remainder of our lives.

Fellow senior and retiree,

Financial responsibilities during retirement

With the economic downturn still casting a shadow over the UK economy, many approaching retirement or newly retired are facing an uncertain future and a decreasing pension pot. If you put your retirement plans in place before the downturn, chances are that the rosy future you’d planned is looking a little more vulnerable these days.

No one can predict when pension funds will recover to past levels and ‘traditional’ ways to capitalise on other investments – such as downsizing to a smaller property – can be increasingly difficult in a flat market. This, combined with an increase in household living costs, means that many are facing a worrying time instead of a golden retirement. So much so that, according to the Prudential, 18% of pensioners retire with debts.

Preparing for retirement

If your retirement is imminent, one of the best ways to prepare for the years ahead is to try living on the income you’ll get in retirement whilst you’re still working. This simple ploy will give you an idea of whether you can manage your current costs and could help you build up a savings pot from the cash you save.

Take stock of your situation

Debt that you can cover whilst working could become unmanageable in retirement so check your budgeting to ensure you’re managing your finances effectively. Assess your monthly expenditure by drawing up a list of any regular bills, food and energy costs and other outgoings such as transport or petrol, and any mobile phone or satellite charges. Now, look at the amount you will have coming in: Include any benefits, income from investments as well as your monthly state and private pension allowance.  By doing this you’ll get an accurate idea of any shortfall that could put your finances at risk.

Deal with unsecured debt

One of the reasons people have to postpone retirement plans is simply because they are forced to continue servicing the unsecured debt they’ve built up. What are the options when you’re approaching retirement with debts that will be unmanageable on a pension? Unfortunately, even those who’ve paid off their mortgage may not escape – as even by remortgaging to release funds you risk exacerbating the problem by securing the debts against your home, potentially putting your home at risk.

How much is your credit costing?

One of the main contributors to the cost of unpaid credit is the interest that’s added to what you owe if you only repay the minimum amount each month. Because interest is added each time based on the total amount you owe, it’s important to try and reduce what’s outstanding by paying more than the minimum – and ideally the full amount you owe.

The cost of charges

Another major factor that could prevent you reducing outstanding debt is the cost of missed or late payments. Not only can these result in charges being added to what you owe, they could also affect your creditworthiness.

Could a managed bank account help you budget?

A managed bank account could help you prepare for your future retirement by helping you manage your finances more effectively and avoid charges as a result of late or missed payments. By dividing up your salary into two accounts – one for your essential monthly commitments and the other containing the cash left over for you spend, it effectively manages your regular payments on your behalf so you know exactly where you stand.  There’s no overdraft so you’ll only ever be spending the cash you have – and managed accounts such as the one offered by don’t require you to pass a credit check to join, although you’ll have to be over 18 and a UK resident.

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2 comments on “Financial responsibilities during retirement

  • What Doom and Gloom?
    To those retirees who prepared throughout their working years, and followed the advice of those who have gone before, the recession in many ways is a true blessing.
    1). Inflation has been held to reasonable levels. Yes, fuel costs have increased dramatically lately, but compare even that to the 35 cents a gallon gasoline you may remember – and to your income at the same time (in my case, around 1969 when income was maybe $6,000). Chances are your pre-retirement income increased by the same amount (ten times or more). If you couldn’t afford to travel extensively then, why should you think…
    2). If you also pine for the 10+ percent CD’s (as in certificate of deposit), remember that when those rates were being paid, inflation was at 15 percent annually or more. You’re better off now with inflation at 3 percent (less if you take out fuel costs). You can buy stocks today that carry a relatively low risk that are paying dividends of 4 percent or more and grow in value over time. Buying single stocks is not recommended however – diversify with managed mutual funds. (No, I’m not a stock broker and never have been, just followed the advice of my father who wasn’t one either).
    3). Did you really believe that social security alone would provide you a comfortable income in retirement? Even the politicians 40 years ago didn’t have the gall to claim that. If you have been in the military, you learned how much to trust the government anyway.
    If you didn’t “live below your means” and save during your pre-retirement years, especially after your children left the nest, it may be too late now. Tell your children, maybe they will listen
    4). Actually, most pension funds have, or should have, recovered to pre-recession levels. No, not to the absolute peak, but the US stock market is almost back to the 14,000 Dow of that time. If your pension has not been at least partly invested in the stock market, what were they (or you) thinking.
    Actually, a significant part of the pension funds problem has been the government. In 1987, my plan was told by the IRS it was “over-funded” and it and its participants would be subject to excessive penalties if they continued to contribute. This “moratorium” went on for seven years! Then about 3 years ago – guess what? We are informed that we are “underfunded” and will face penalties if we don’t take drastic steps to increase contributions.

    The recession (and the resulting lower inflation) is especially beneficial to those who are on a pension without a cost-of-living adjustment or COLA.
    Don’t expect the recession and low inflation to continue forever. For retirees, these ARE the good times. Just a few reasons are mentioned above. There are many more.

  • Hi Jim,
    Thanks for the great comment. I am going to reprint your comment as a post so more folks will read it.
    Please feel free to send your comments, thoughts and advice at any time.
    All the best,

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