Do you daydream about a carefree retirement? A Picture-Perfect Retirement?
Our parents’ generation had a very different vision of easing back from the world of work. Traditional retirement was seen as the chance for a quieter life, less pressure and time to take it easy.
Today, we’re far more likely to be healthy and active, relishing the chance to fulfil our ambitions to travel and explore, looking forward to the company of our family and friends, and enjoying new experiences.
For many people, the first ten years of retirement have a definite sense of purpose – a chance to embrace the freedoms you’ve worked and saved hard to achieve. My retired clients tell me they’re busier in retirement than ever before. Many wonder how they ever had time to go to work!
Slowing down is inevitable in our later years. Greater life expectancy brings different challenges. Financial planning is essential if our picture-perfect retirement is to become a reality.
Your retirement, your way
Every client I meet with has a different story and a different set of goals.
Rishi and Sue had retirement on their minds. Sue was a headteacher when we met, and her husband Rishi worked for the local authority. Both were aged 55 and keen to retire immediately or as soon as possible.
A woman aged 55 can expect to live to age 87 on average, and she has a 1 in 10 chance of living to 99.
A 55-year-old man has an average life expectancy slightly lower than his female counterpart at 84 years. Statistically, he has a 1 in 10 chance of living to 97.
If Sue and Rishi retire now, they’re likely to have more than 29 years together in retirement – plenty of time to cross off the once-in-a-lifetime exotic holiday on their bucket lists if their pension funds, savings, and investments can support their plans.
Will your pension income last for a lifetime?
In financial planning terms, it’s realistic to think about cash flow through to age 100. The number of centenarians in the UK rose to its highest-ever level in 2020, reaching 15,120, an increase of almost a fifth from the previous year. You can find out more about official averages for life expectancy online.
Did you read my ‘Facing Your Financial Fears’ blog? I explained how our first meeting is always a fact-finding session but never an interrogation. It’s my role to clarify any financial terms and jargon. I’ll check your understanding in a sensitive and supportive way. I may gently challenge your figures and help you balance optimism and pessimism. You may be over or underestimating the costs of living in retirement, and a realistic financial picture is essential for sound planning.
Sue and Rishi’s retirement vision included travel. The couple wanted to spend 6 months in France, and with no children, they felt free to spend their money. Unlike many clients, Rishi and Sue weren’t wrestling with thoughts of preserving their capital for lifetime gifting or providing an inheritance for the next generation.
Picture-perfect Planning
We worked together to establish a retirement budget.
This budget is likely to change over time. It’s a starting point. A budget is a helpful way to set expectations and measure progress at future meetings.
Sue and Rishi understand that after the travel and fun, there could be a period of more intense spending when they might need to fund quality later life care. With a goal and budget established, we could move on to talk about pensions.
Like many of my clients, Sue and Rishi didn’t clearly understand their pensions.
Sue benefited from a generous Teachers’ Pension Scheme, with a retirement age of 60. She had the option to receive her pension income earlier (subject to an actuarial reduction).
Rishi had several pension pots from his previous employment in the private sector. He was a member of the Local Government Pension Scheme, so early retirement was a possibility he could consider.
Both Sue and Rishi were entitled to the full State Pension at 67. You can check your forecast online.
Forecasting the future
Using financial planning and forecasting software, we looked at Sue and Rishi’s pensions, savings, investments, and ISAs, and we factored in their assets, income, and expenditure. I made reasonable assumptions about the future, so together, we could see if their retirement goals were realistic and affordable.
A cash flow forecast is a valuable tool. I use it to help my clients understand the longer-term financial impact of taking early retirement from a pension scheme.
Sue and Rishi would have a smaller sum left in the ‘pot’ at age 100 if they chose to stop work now and take early retirement benefits from their pensions… but they could also see the chance of running out of money before the end of their lives was low.
Client engagement
Working with Sue and Rishi is a joy. I love how engaged they are in the whole retirement planning process. Both had very little interest in how pensions work, but they’re keen to understand what the future could look like and how their hard-earned wealth could support their dream life in retirement.
Financial planning is about visualising the future. My forecasting process uses accurate detail to educate and predict, avoiding rough guesses based on crude figures.
After receiving their postcard from the beautiful Loire Valley, I have proof that Sue and Rishi have achieved one of their fundamental retirement goals. I can’t wait to see them again for their annual review and help them stay on track.
Let’s talk about building your picture-perfect retirement. I’d love to help.
Book a FREE discovery call with me HERE
