Most of the work we do is focussed on people and not on money or financial aspects of retiring or planning to retire. In part because that’s what everyone else does, but it is also down to the belief that considering your long term future through the lens of money tends to lead to a future life designed to fit around your finance, when your future happiness is more likely if you design your future and then plan your finances to fit your life.
Unfortunately, the financial services industry, the media and Governments mostly focus exclusively on money, indeed almost any institution you care to name that has an interest in your retirement, for example you employer, professional body or union does the same. They are all guilty of putting the cart before the horse. Society has over the last 70 years or more become brainwashed into thinking money first life second.
Now I am not trying to suggest you can live in retirement without money, a retirement in the absence of sufficient money is grim, but a retirement with only money is frankly dim.
What is more absurd is that our best financial decisions are usually made after we have made a plan for ourselves. Why is this? Mostly it is because we can get a much clearer grasp of what we need financially, thereafter we can determine whether to generate some of the income we need through work, whether part time or on an ad hoc basis. There is plenty of evidence that working and remaining active for a lot longer than we have come to expect is beneficial to our health. I am also not suggesting that you must continue to work, rather that continued work offers both an opportunity to provide a happier healthier life and one that is more financially resilient.
Many people are in jobs they cannot wait to leave behind, I understand that, but working does not mean continuing to do what you are currently doing and flogging yourself to death, that would be absurd.
How should you think about your future and money?
It would take too long to fully explain in this post, after all we run a 3 hour workshop to help people get the basics of this right. The following though is a very broad big picture look at what you should do in order to make a plan for your money;
- Determine the life you want to lead post retirement. What will you do, where will you live, will you develop new skills? Do you wasn’t to continue to work in some way?
- How much in today’s terms would this lifestyle cost?
- What age would you like to have the option to make these changes?
- How much of the income do you have in place in the form of pensions, whether employer, personal or state?
- Is there a shortfall? If so how much?
- What are the levels of your savings and investments? Whatever that number you can either assume they can produce income at the rate of 3.5% per annum to add to the earlier figure or, take the capital amount and divide it by the number of years you expect to live. Personally I would recommend the former not the latter.
- Is there still a shortfall? If so could you make this up by working in some way from the age you want to make the change?
- Can you add to your savings and investments by working say two or three years longer?
Rarely in my 35 years as a financial adviser did I fail to help clients find an answer. I ceased being an adviser however to focus on the process of making lifestyle plans without the distraction of worrying about clients money as I found too often the money got in the way. I found that where I could keep my clients focussed on themselves first that the financial decisions became easier and more effective, including through periods of market turmoil and inflation. All to often when people do these things in reverse, i.e. money first life style second they wind up with a life they do not like.