May 21, 2024

How to plan for a stress-free retirement

Pig in lifebelt

It’s arguably the biggest life stage of them all: Retirement.

That long-awaited time in our lives when we get to reap the rewards of decades of hard work, indulge in hobbies, travel, spend more time with family and friends or simply enjoy the peace of daily life without having to set the alarm.

However, adjusting to such a significant lifestyle change isn’t always easy. Yes, retirement can be an exciting new chapter in our lives.

But for some, the thought of stopping work altogether can also be quite daunting. After all, our careers play an important role in shaping our identity as well as providing a familiar structure to our lives. To suddenly cut the cord means we have to create a new structure and find something else to fill the void.

After the initial honeymoon period, there will inevitably follow a period of adjustment as you get used to the “new normal”.

In our experience, it is those clients who manage to successfully navigate this phase, that go on to make the most of their retirement.

This is where we come into it, helping you prepare for both the emotional and financial impact that comes with calling time on your career. After all, you will have spent a large proportion of your life working towards this point, so why not make the most of the opportunity?

Adjustment #1:

What is it that you actually want to do?

As you work your way through your 40s and 50s, you’re probably at, or nearing, the peak of your career and potential earning power. Therefore, it is probably of little surprise that many clients find the prospect of closing this chapter in their lives quite daunting.

For some, moving into retirement can feel like an adjustment down. A marked contrast to earlier life stages where it feels like everything is ramping up – whether that’s leaving education to start work, chasing that promotion, starting a family, or moving to a bigger house.

This is where lifestyle planning comes in handy.

Although we all have ideas about how we are going to spend our golden years – seeing the world, taking-up new hobbies or simply spending more time doing the sort of things we want to do – not so many of us get to the point of planning when and how we are going to achieve them.

As your advisers, part of our job is to encourage you into giving some serious thought to such matters, focussing your mind on what it is you actually want to do with your new-found freedom, what you want to achieve and when. This then becomes integral to your retirement plan and, for some, can be just as beneficial an exercise as the advice given in relation to the finances of stopping work.

Adjustment #2:

From saver to spender.

The second adjustment is to your mindset, to get your head around the realisation that you are no longer earning, saving or accumulating for your future. You have now reached that point in time that you have been working towards for all these years. Coming to terms with this shift can sometimes not be quite as easy as it first appears.

However, in our opinion, this is a really important change, and can be pivotal to making the most of your retirement.

By stopping work, you make a conscious decision to move from a lifelong period of accumulation, to decumulation. In other words, you are starting to spend-down the assets that you have worked so hard to build-up over all those years.

For some, not being able to understand this change in dynamic will result in them taking a naturally more cautious approach with their hard-earned cash, tightening the belt. By not being able to understand their overall financial position they may choose not to do certain things that they might otherwise like – after all, they don’t want to run out of money in their old age. Perhaps they won’t go on that holiday they have always promised themselves or to not change the car quite yet – it can do a few more miles.

Matters can be complicated further by conflicting advice that is often given around retirement – for example, how much you will need to be comfortable in retirement, normally expressed as an annual sum that somehow some “experts” have calculated you will need to be OK.

Altogether it can be quite overwhelming.

So how do we help?

Firstly, take a step- back, take a beat. Congratulations, you’ve done it – you have managed to retire after all these years! It is now time to look forward to the next stage and to make the most of it in your own way.

Put aside all the “advice” around how much you will need to have in retirement to be happy, and lets concentrate on what you want to do in the future. It is not formulaic.

From this starting point, we use cashflow modelling to give our clients a much clearer vision of their retirement, to help them understand their overall financial position and spending patterns.

We create a detailed picture of your assets, income and expenditure to help you visualise what can otherwise be quite a complicated situation.

By helping you understand this picture, and revisiting it each year, our clients become more confident and aware of what they can do and achieve – changing their outlook from lifelong saver, to spender.

The Journey from Saver to Spender

In the next part, we’ll look in more detail at how to generate income in retirement as efficiently as possible, and in what order. How to “box clever” with those assets at your disposal.

This article is part of a mini-series on how financial planning can help you through major life events. Want to see more? Read our thoughts on what to consider if you are going through a divorce.

May 21, 2024