Retirement can be the best time of your life - you've worked long and hard, perhaps had kids, and now you can turn your full attention to whatever you like. It's time to indulge in a bit of well-deserved you-time.
But what are you going to do with your pension money? Buy the new car you've always wanted? Splash out on a dream holiday? Spend more time at the golf club? Or perhaps invest in the stock market and make that money go even further?
Whatever you decide to do, before you even get out of the starting blocks you'll need to decide how to use your hard-earned pension pot.
How much of a pension do I need?
Determining how much money you need to fund a good standard of living during retirement is entirely down to personal preferences, but it helps to know the national averages. Annual spend per individual during retirement is between £10,000 and £24,000. Your figure could be more or less, and will probably depend on where you live.
Don't rely on the state pension. At best, it will be just £8,090 every year (£155.65 per week) - it's not much, so you'll need an alternative source of income.
If you do have a private pension, employee pension, or personal savings, what are your options once you hit retirement? Here are five ways you can use your pension pot to fund the retirement you've always wanted.
1: Leave it for a rainy day
For truly disciplined savers (and those who have the income or savings to keep them going) you can leave your pension pot untouched and continue as you were There's no legal or financial need to draw on your pension just because you've reached pension age; you can even defer your state pension.
2: Purchase an annuity and receive a guaranteed income
Annuities are popular pension products. You exchange your total pension fund for an insurance product that pays out for the rest of your life, no matter how long that is. But there's nothing left over to hand on to your family once you pass away and rates can be unattractive.
3: Leave your pot invested and access 'income drawdown'
This option gives you greater control over your income. Your pension is invested, targetting a regular income. And you're not restricted to a set payment scheme - you can choose when to withdraw money.
4: Take it all in one go
If you really need a lump sum then you have the option to take the whole lot in one go. You get 25% tax free, but the rest will be taxed at your highest rate at source. Tread extremely carefully unless you know what you're doing.
5: Mix and match your pension options
None of these options are mutually exclusive - you can select more than one and spread your strategy. Although this has definite advantages, it's a good idea to get professional advice first.
So, there you have it. All the options are in front of you. If you'd like to discuss your pension options and how you can save for a better retirement, contact the expert financial advisers at Flying Colours today on 0333 241 9900.