It’s important for retirees to have spare cash for last-minute holidays, says financial expert Peter Sharkey.

In Maike Currie’s excellent book, The Search for Income, she writes: “Of all the life stages, the period leading up to retirement is arguably the time when you will have to make the most important financial planning decisions.”

As someone on the cusp of retirement, I can confirm the accuracy of Currie’s words. Most would-be retirees will anticipate the need for a thorough, well-considered financial plan, but there’s a strangeness about this pre-retirement period too: it’s not all about money.

This might sound morose, but after assembling information from websites detailing how long your pension funds may last, I’m suddenly aware of mortality. The feeling became more acute when a good friend revealed he had prostate cancer.

Currie doesn’t mince her words or attempt to circumvent this point: “You will need to arrange your investments in such a manner that should you pass away prematurely, your family and dependents can still benefit from your accumulated pension savings.”

The prospective retiree must ensure that their retirement income is sufficient for 20-odd years, hopefully longer, before taking account of equally important matters such as tackling a lengthy bucket list.

Pivotal to the successful application of these factors is health. Staying in decent nick is hugely important, while ignoring possible future care costs could play havoc with the best-laid retirement plans. Accordingly, it’s important to avoid locking yourself into fixed income arrangements which could hamper the need for future flexibility. Consider, for example, the fact that at 3pc inflation, the buying power of £1,000 in 20 years will be £554.

Investors will find that some income arrangements have been effectively locked in for years. For example, rental income from a buy-to-let property portfolio, a guaranteed company pension, or receipt of the state pension.

Many people consider the state pension as their ‘base’ income. Clearly, those lucky enough to supplement this do not want to make any expensive mistakes, which is why decisions taken at this juncture are, according to Currie, likely to impact your income for the remainder of your life: "It is important to make sure you have a good look at the options available to you for drawing income from your pension before you reach retirement.”

But where to start? Friends tell me they created bespoke retirement income spreadsheets to analyse and plan monthly cash flow. Neither believes their respective analysis is 100pc accurate because, as one mate declares, it’s important to leave room for last-minute decisions like going to Greece. 

The prolonged period of extremely low interest rates caused a discernible shift in investor attitudes, tempting millions of pre-retirees away from traditional methods of funding retirement. The era of ultra-low interest effectively ushered people towards riskier forms of investment, particularly shares, in search of growth or greater levels of income.

However, annuity rates (and sales) have risen strongly over the past six months and, according to, it was possible for a healthy 65-year-old  in mid-February to enjoy a gross return of 6.75pc on a lump sum annuity investment.

Many will retain an interest in equities but it’s possible that we’re currently witnessing a further shift in investor behaviour. Political and economic uncertainty continues to make burgeoning numbers of people increasingly risk-averse and, despite the dark spectre of lingering inflation, millions will retain a sizable proportion of their assets in cash.

Financial advisers maintain that the inherently defensive, risk-averse investor – our would-be retiree – should retain around 10pc of their assets in cash, although this is no hard-and-fast rule because it depends upon the size of an individual’s retirement fund and their pension arrangements.

Pre-retirement is clearly a time for hugely important financial planning decisions. Get them right, however, and you can enjoy tackling that bucket list...

For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.

This column is for general information only and cannot be relied on as financial advice for individuals. Consult your professional adviser.