Planning 30 to 40 years in retirement

I recall an interesting anecdote from a course I recently attended (maybe it was just interesting to me) that most people spend more time planning a holiday than they do a potential 30-40 year long retirement. Whilst I’d not seen it expressed in such stark terms, it certainly mirrored many of the conversations I have with people who are within five years of what they hope will be their retirement date.

By John Condon, Chartered Financial Planner

Most people long for it, although some dread it, worrying that retiring may result in them losing purpose and a sense of identity. How will they fill their time once the daily hustle and bustle of work comes to an end? To be fair, people in this category in my experience are the ones most likely to expend a little more energy thinking about it.

The retirement finishing line

It’s those that have a dream of reaching what they see as a retirement “finishing line” that sometimes don’t really think about what this new chapter in their life might look like –  it’s just all about getting over that line for them – but then what?

Understandably people often associate financial advisers as someone who may “sort out their pension” which of course we will do. However, this is often the final piece of the jigsaw in a planning process where we ask clients to really think about what their retirement might look like. We ask lots of questions, sometimes challenging questions such as:

• How are you going to get on spending so much time in the company of your spouse, when for the last 30 years you have both been at work all day?!
• What are you going to retire ‘to’ rather than ‘from’? In other words what will fulfil you?
• How are you going to find the right balance between having a purpose to get out of bed in the morning and enough money to sleep at night?

When we get to the bottom of what people really want from retirement, often questions start to be asked of us. Do I have enough? How much do I need to save?

These are two of the most common questions we face as financial planners and in our opinion the most effective and comprehensive way of answering them is by using cutting edge financial planning technology that projects their financial future. The output and conclusions are then presented back to them in clear easily digestible graphics.

Lifetime cash flow forecasting

Forecasting what will happen to their money shows whether they have enough to live the life they ideally want to lead, or whether they need to save more, or work longer. The chart below is part of the output I recently presented back to a couple to demonstrate that they could retire from jobs they no longer enjoyed and live the life they’d told me they really wanted to live, without fear of running out of money.

Behind the output numerous calculations had been factored in, including pension income and tax free lump sum payments, projected expenditure, holidays, replacing cars, state pensions kicking in, house downsizing, gifts to family, possible fees for long term care, tax rates, inflation and many more.

This process did not involve us “selling” them a financial product – the products they already had were fine for the job they needed to do. What we were able to do as financial planners was bring some meaning to their money and give them the peace of mind that they could make a life changing decision to quit their jobs and head off into a properly planned retirement. All backed up by verifiable financial evidence that they could afford to take this step.

If you would like to have a free no obligation chat with one of the three Chartered Financial Planners working here at Thornton, please feel free to contact us at mail@thorntonfs.com or on 01624 660220 and we’d be delighted to try to help you achieve your goals.