FTAdviser reports that 1 in 7 people who have accessed their pension regret how much they have withdrawn (according to L&G data).

On the other hand, Pensions Age reports that retirees who take regular advice from a financial adviser are almost 50% less likely to worry about their financial decision-making.

A financial plan does more than organise your finances. It provides clarity about your retirement income, security for your wealth, and peace of mind for your future.

Keep reading to find out more about the practical ways a financial plan can help you sidestep pension regret.

A financial plan uses objectives to get your finances moving

One way financial planning can help is by setting clear objectives.

For example, if you want to retire at 60, you can use average life expectancy data to gauge how many years of retirement you should plan for, and how much you need to set aside each month.

Similarly, picturing your ideal lifestyle can help you calculate how much your desired retirement might cost. Consider:

• Day-to-day costs like a morning coffee and a paper
• Monthly costs like bills and car leases
• Large, regular expenses like overseas holidays or birthday gifts.

At the least, you’ll likely want to continue your current standard of living. In which case, you can use your expenses now to help determine the potential pension income you’ll need.

Ultimately, defining your financial goals gives you clear objectives to work towards, which could be the motivation you need to get started and stay on track.

A financial plan can help you budget with all your retirement income

FTAdviser reports that retirees leave an average of nine years of retirement unfunded based on current withdrawal rates. Financial advice can help you think about the withdrawals you make and how to budget with your pension and non-pension income.

1. Income diversification

While pension withdrawals will likely make up the majority of your retirement income, they can be complemented by other income sources to help reduce the likelihood of running out of money in retirement.

For example, alongside pension contributions, you could also withdraw from the ISAs you hold or receive regular income from buy-to-let properties.

Diversifying your income can help alleviate some of the pressure on the performance of your pension as your sole source of retirement wealth.

2. Budgeting

A budget can help you organise your finances in retirement to increase the resilience and longevity of your retirement wealth.

If you haven’t budgeted before, a good starting point is the 50/30/20 rule:

• 50% of your earnings go towards essential costs, such as mortgage payments, food, and utilities.
• 30% of your costs are for personal spending, like new clothes, streaming subscriptions, and eating out.
• 20% of your costs go towards your financial security, whether that is building a financial safety net, topping up your savings and investments, or reducing debt.

This isn’t a fixed ratio – you can adjust these percentages based on your personal objectives. Just be sure to always pay your future self first and budget with what remains.

3. Emergency fund

An emergency fund can cover sudden and expensive accidents or emergencies, such as:

• Sudden healthcare costs
• Housing and home repair emergencies
• Cost of living shocks.

During your working life, your emergency fund should cover around three to six months of living expenses. Your retirement rainy day fund should be much higher – usually equal to one to three years’ worth of essential living costs.

This fund should mean that you’re not forced to withdraw a large sum from your pension to cover unexpected expenses. This can impact the rate of return on your investments, especially if you withdraw during a market downturn, which might limit the longevity of your remaining pension wealth.

A financial plan prepares you for “what-if” costs

MoneyWeek reports that 60% of over-45s underestimate the cost of self-funding a care home by thousands of pounds a year.

In reality, estimates for self-funded care are around £66,456 per year, and 4 in 5 people aged 65 and over are likely to require some level of care before they die.

Long-term care is just one surprise that might await you in retirement. Others include:

• Sudden market downturns
• New tax rules
• High inflation
• Family financial support.

Instead of waiting for these events to happen, accounting for their potential cost in your financial plan means that you won’t be surprised later on.

A financial planner can use cashflow modelling to predict the effect of these events on your retirement wealth and tailor a bespoke savings and investment plan to help you fill in these hypothetical gaps.

Get in touch

Curb pension regret before it happens by reaching out to The Pension Planner today. Our pension experts will make sure that you have everything you need to retire comfortably and securely.

Email info@thepensionplanner.co.uk or call 0800 0787 182.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow planning.