3 Pieces of Smart Female Financial Advice for Midlife and Beyond!
FEMALE FINANCE FOR THE FUTURE
Women are living longer, being more active and having more choices in life than ever before, which can make organising your finances and planning your retirement overwhelming, confusing and one of those things that gets consigned to the 'nice to do' list.
Claire Sweet is a financial advisor with a passion for alpacas. She recently won Best Business Woman in Financial Services, one of the UK's most prestigious national awards for female entrepreneurs.
Claire’s aim is to empower women by giving them a firm grasp of their finances, regardless of whether they have a husband or partner, and this allows them to make their own informed money choices. She’s given us a few tips for women to take control of their future finances.
So many people are retraining to do their dream job, and then working until they are older - retirement these days is for many people simply the time when they want to work less hard rather than stop work completely.
With this in mind – there are 3 top tips when looking at planning your income for the future, whilst ensuring you have enough to live on now.
See how much money you actually spend each month
In order to do this, you need to be sure that you’re bringing in more than you spend each month and the only way to know this for sure is to fully understand how you are currently spending it.
Effectively you need to do what my mum would have called ‘balancing the chequebook’ – write down how much money comes in each month, then then deduct all your essential direct debits - things that you need to spend each month– mortgage/ rent, car loan payments, minimum credit card payments, utilities, car/home/life insurance, etc. Or you could use a budget planner – if you’d like a copy of the one I use please email me firstname.lastname@example.org
Once you’ve done this it will tell you how much money you have left to spend on food, clothing, travel, socialising and any other costs that you may want to spend.
You should also do this using your expected income and costs in retirement. You are likely to have repaid your mortgage, and won’t need to pay for your commute – but will you need more money for socialising, holidays and days out?
Will you get a State Pension?
To get a full SRP you will need 35 years of National Insurance contributions. You can check your NI record on the gov.uk website to see if you will have the required years. In the past if you have been on a low salary or not working and didn’t pay National Insurance Contributions then you may have gaps for those years, unless you choose to make up the contributions voluntarily or received NI credits because you claimed child benefit for a child under 12.
But, even if you do qualify for a full SRP – what sort of quality of life would you have on £712 a month? You’ll need a way to top up this income if you don’t want to have to work forever.
Will you get a private or company pension?
If you’ve changed jobs more than once, you could have a myriad of pensions dotted about all over the place and it can be really hard to keep track of them all.
Even if you only have a single pension, the likelihood is that although you may open the annual statement to look at the pot value, it will then get consigned to a drawer, or however you store paperwork at home.
It’s time to dig it out and see what it will be worth to you when you choose to take it.
There are main 2 types of pension scheme – it’s important to know which you have, as it determines how you get to take the money.
a. Final Salary (defined benefit) - The NHS, Local/central government, teachers and old schemes from big companies like Boots, Sainsburys, etc.
Guaranteed income until you die, then SPOUSE gets a pension for their lifetime (usually half of your pension). You cannot assign this pension to anyone else if you are not / no longer married, and the fund dies with you.
b. Money Purchase schemes
Over the years you pay in to a pot which is yours to spend at retirement.
On older plans you can take 25% tax free, but the rest you must either take out in full (massive tax bill) or buy an annuity – a guaranteed income for life. The problem is that annuity rates have plummeted in recent years so your pot may not buy as much as you’d like. Your pot forms part of your estate on death and is paid to your executors to distribute, which is then liable to Inheritance tax.
On newer plans, you have flexi-access, so you can dip into the remaining money as and when you wish – and you can leave your pension to your choice of beneficiary, even in the form of a pension – so reducing the IHT Bill.
Chatting to a Financial Adviser can help you to understand your options and make the best use of your money, ensuring you get to spend more, save more and pay less tax!
Claire Sweet runs financial courses - The Invest in YOU course enables you to manage your finances, and plan for your future without the headache.
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