Should I Defer My Retirement?
If you don't need to retire straight away if for example you are still receiving income from other sources or you can live off your savings, you could defer retirement for a couple of years and start taking your retirement income at a later time. The amount you receive annually from an annuity is based on how long you are expected to live, deferring retirement could mean a substantial increase in the amount you get annually.
The graph shows the advantage of waiting 5 years with a £75,000 pension pot. Just before the age of 74 you would begin receiving a higher annual income.
Ultimately, the decision about whether it is the right time to retire is based on two main factors:
- Can you afford your lifestyle if you do?
- Do you want to continue working?
If you are looking at early retirement, you may need to manage for a few years on the income of your private pension before your state pension will start to be paid. One option is to take your tax free cash (25% of total fund) up front and use that to cover the intervening years, although this will reduce the annual payout of that annuity.
When considering the financial implications of deferring, remember to think about your family history and personal health, as well as the predicted income figures.