If securing a high-quality retirement income is high on your agenda, nailing the answers to the following questions to ask about retirement planning questions ought to be high on your list of priorities.

Whether you are just starting your career or approaching retirement age, ‘today’ is the next-best time to explore these, if you haven’t already done so. With the intention of helping you make informed decisions, here are 9 important retirement planning questions to consider and answer.

1. What are my retirement plans, and how much income will I need?

Identifying even broad retirement plans is the first step in creating a solid plan here. Consider factors such as your desired lifestyle, travel plans, healthcare expenses, and any other financial commitments. 

Consider collaborating with your financial advisor to estimate the income you’ll need to meet those goals and maintain your desired standard of living throughout retirement. The rate of expenditure and hence the level of retirement income you will need will have a dramatic impact on what will be required to reach a point of financial independence.

Some people plan to have the same or indeed higher income in retirement than they did during working life, at least for the first decade or 2. Others have retirement income expectations well below their previous incomes. That income need will be driven by your desired plans, and lifestyle. And no two people are alike in that regard. That desired lifestyle is the foundation of your retirement plan. That’s the place to start, the rest will follow.

2. How much should I save for retirement each month?

Determining how much to save for retirement depends on several factors, including your current age, desired retirement age, income, and existing savings and income sources.

According to the CSO, as of 2021, there were c130,000 individual landlords in Ireland. Assuming any debt on the properties they own will be cleared by the time they retire, these individuals will hope to generate an income source from the rental properties they own.

The vast majority of us will also be entitled to State Pension income. And others will have investment assets from which they may be drawing dividends or income from, to support their retirement income needs.

The most common form of income generation in retirement is of course an individual pension benefits. Be that group schemes from past employments such as defined benefit or defined contribution pension schemes. Or schemes that they set up and navigated personally, such as Personal Retirement Savings Accounts (PRSA) or Personal Retirement Bonds.

The vast majority of us have to live within some means :), so we can’t put endless amounts of funds into pensions. Having said that, we ought to know how much annual or monthly income we will need our pensions to generate for us when we need retirement income. Working backward, you will want to also know how much you should be contributing, in order to give yourself a high probability of generating a pension pot sufficient to deliver that income at that time.

Your financial advisor or any amount of online calculators can help you calculate that.

Or you may want to have a read of Blog 176 where we explore how big one’s pension pot should be, and how to try to achieve that target.

3. What are my investment options for retirement savings?

Sticking with that large pillar of retirement income, how should one invest their pension assets? Your financial advisor should be able to competently guide you through the various investment options available for retirement savings, such as individual retirement accounts (PRSAs), and personal investment accounts. Indeed, if you are a member of a Defined Contribution company scheme, or are doing AVCs, they should be able to tell you what the pros and cons are of the different funds or portfolios they have.

General consensus is that as we approach retirement, we should reduce the level of risk/volatility in our pensions. I don’t buy that, and the research doesn’t support it either. Check out Blog #53 (years ago!) where we share some research on that very topic.

4. How should I allocate my retirement portfolio?

Asset allocation is a critical aspect of pension and retirement income planning. Your financial advisor can help you determine the appropriate mix of stocks, bonds, and other investments based on your risk tolerance, time horizon, and retirement income goals. They should assist in balancing growth potential and risk mitigation to optimise your portfolio.

This is linked to Lifestyling, and the question about how much volatility to carry as you approach and enter the draw-down phase. The easy answer for any advisor to give is to say ‘Stick to the Lifestyling approach, it will help reduce risk and balances need for income with avoiding risk’.

In reality, this has seldom been true in actual client outcomes. Provided one can handle the fluctuations, a more volatile portfolio has delivered better outcomes in the vast vast majority of retirement time-frames over the past 100 years or so.

Provided your tolerance and capacity for volatility allow for it, push to ensure there is no reason not to go with the approach that delivers better outcomes for long-term income generators.

5. How can I minimise taxes during retirement?

Taxes can significantly impact your retirement income. And the more income you have in retirement, the higher your rate of taxation, up to a point of course! It often comes as a surprise to people when they realise that a mid-range their retirement income may only have an effective tax rate of c15%.

This means more money in your pocket to enjoy your desired lifestyle! Again, worth consulting with your accountant or financial advisor to explore strategies for tax-efficient retirement planning.

6. How should I plan for additional expenses in retirement?

Healthcare, home care, and care needs are expenses at the back of peoples’ minds when they approach more mature years. And they can be a significant financial burden. Discuss with your loved-ones, what your future wishes are for a care perspective.

Once you have a preferred plan, if the need arises, it’s then a case of figuring a financial strategy to support the plan. Your accountant, solicitor and indeed financial advisor may play separate roles in developing that plan and the different aspects of it.

Financial advisors can help you estimate these costs, and incorporate them into your retirement plan to check viability.

7. How can I protect my retirement savings against inflation, and the unforeseen?

Inflation can and will erode the purchasing power of your savings over time. It will therefore also reduce the value of any income that those savings and assets will generate. It’s therefore obviously important to figure our how you will aim to at least retain that power in the coming decades.

When it comes to pensions, your financial advisor ought to have that conversation as part of the investment strategy. With regards to any other sources of retirement income, worth exploring strategies to ensure your incomes will keep abreast of inflation. 

Of course, as of June 2023, inflation is currently running at c6%, which is not a long-term average – so decide what long-term average you feel comfortable and prudent to assume in your planning.

Life is unpredictable, and unexpected events can impact your retirement plan. Ask your financial advisor about contingency plans for scenarios like job loss, disability, or the need for long-term care. They can help you consider and develop strategies to mitigate risks and protect your financial security.

8. How often should I review my retirement plan?

Some feel that once they have the plan defined, that they stick it in the drawer and forget about it. This might work for some, but in most scenarios, it will lead to missed opportunities or erroneous decisions, or both!

Regularly reviewing and, where necessary, adjusting your retirement plan is important. It can help ensure your plan continues to align with reality, and your desired lifestyle.

Consult with your financial advisor to determine an appropriate review schedule based on your circumstances. Some folk love to have more frequent check-ins than others.

And for some people, more frequent changes in income, family situation and plans may require more frequent review, exploration and possible plan adjustment.

9. How will my estate be managed if I lose capacity, and when I die?

One of the big concerns for more mature people is the handling of their estate and their assets if they are ill or lose capacity. Estate planning is therefore an essential aspect of retirement income planning.

Discuss your wishes regarding the distribution of your assets, beneficiary designations, and the creation of a will or trust with your financial advisor and/or solicitor. They can work in conjunction with estate planning professionals to help ensure your wishes are fulfilled, irrespective of what the future holds for you.

Final Thoughts – Questions to Ask About Retirement Planning

Retirement income planning is an exciting project to undertake! It does requires careful consideration and a little effort. And I do believe it is aided by collaborating with a trusted advisor, accountant and solicitor, to ensure all angles are covered.  

By asking these important questions, you can too hopefully gain clarity about your retirement goals, develop a personalised retirement plan, and navigate the complexities of retirement with confidence and excitement!

Start early, stay engaged, and regularly review your retirement plan to make the most of this wonderful time in ones life!

Enjoy.

Paddy Delaney QFA RPA APA