As a business owner or a freelancer, sometimes pensions might not be prioritized as much as they should be. However, for many entrepreneurs over the age of 55, getting your pension early can give you the financial boost that you need to reinvest into your business, start a new project, or find more financial stability. In the article, we will discuss both the pros and cons of taking your pension early and whether it might be the right decision for you.
Advantages
- As an online business owner or freelancer, one of the major advantages is the ability to use this pension pot to be able to invest in a business or project which can then support you throughout retirement. It can also enable you to live well as you get older by paying off any debts or bills which may have put a strain on your finances in retirement.
- If you speak to a financial advisor, you will be able to make the most of your decision and pay tax most efficiently, enabling you to get both the advantages of less tax and more of your pension pot at once. Financial advisors can give you the support that you need by working out the best decision for you and your business, including how to reduce the amount of tax that you are going to pay. If you want to get into the industry, visit portafinajobs.co.uk to see the range of interesting roles that are on offer.
- 25% of your pension pot is tax-free which can be a great advantage to those that want to take only part of the amount at once, and it is beneficial to take this pension pot over a few years to lower your tax rates.
Disadvantages
- If you take all of your pension pot at once, you may be subject to large tax bills if you exceed your annual income, which increases in accordance to the amount of money that you have taken out. This could diminish the total amount of your pension by eating into the amount that you are receiving.
- You will not be able to take this pension pot out until you are at least 55, unless in emergencies such as poor medical health. However, everyone at the age of 55 or over are able to claim a pension at once if they have a workplace or private pension.
- It may diminish your retirement funds in the future as you will have less of an income going into your bank account throughout retirement. If you are going to take your pension early, you need to combat this disadvantage by planning other ways to gain an income, such as getting a regular amount of money from your business opportunity (which you may have used your early pension pot to create), or relying on the state-provided pension to fulfil all of your everyday monetary needs.
- You will not be able to claim a pension at once if you have an unfunded or final salary pension, with final salary pensions having to be moved to private pensions in order to be used at once.
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