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When approaching retirement age, financial circumstances suddenly become of key focus to many people particularly this year as the economy has plummeted into difficulties. The reality of fixed income living and rising costs suddenly weighs heavily on peoples' minds and it is an important time to take stock of personal finances.
Many new pensioners may have staked their savings on shares or equity investments or their home's value - possibly intending to sell up and downgrade to a smaller property, or sell their stock market investments to provide an income. However, with both the stockmarket and housing market currently depressed, these are no longer the attractive options they previously may have been.
Equally, due to the increased cost of living over recent years, particularly thanks to the previous rise in house prices, many people approaching who are about to retire may have outstanding mortgage or unsecured debt on credit cards or loans. With pensions also worth less than they ever were - particularly if linked to stockmarket performance - problems can start to occur.
The first thing for people in this situation to do is to take a deep breath and do a full audit of their current financial situation. This could mean booking in some time with an independent financial advisor to assess assets, expected income and debts. Be aware that some financial advisors are affiliated with certain organisations and work on a commission basis - you are well advised to find a truly independent advisor.
At the same time, start reining in all spending - go back to old fashioned budgets and spending diaries to see where your income is going. Scour the house for unwanted items and sell them on an auction site to make some extra income - and use it to pay off some of those debts. Cancel your holiday away - and pay off some of the credit cards. Consider replacing your car with something smaller and cheaper. Alternatively, look for ways to keep earning income - a part time job or own business for example. Pensioners nowadays are active, sporty and not ready to start living a quiet life - so why not put some of your hobbies into good use or pursue a lifelong passion to make some money on the side.
Then get specialised help and advice for your bigger financial decisions. For example, you need to decide whether you wish to take part of your pension as a lump sum or buy an annuity - and the wrong decision can cost you thousands of pounds. Equally, you may want to look at selling your home and moving somewhere smaller - although admittedly now may not be the easiest time to do it whilst the housing market is so depressed or even look at Assisted Living.
If your debt problems are large and worrying, you would be advised to seek help from a debt management service who can help you decide whether a debt repayment plan, IVA or similar scenario may be appropriate for you. You may find that the situation is more manageable than you think and certainly taking the first difficult step of seeking advice, will be a real weight off your mind and a first positive step towards solving your debt problems.
