In this blog series, we’re looking at the point of it all when it comes to retirement. This is the point where we step over the threshold and look at the unique challenges and opportunities faced in retirement. There’s a lot to cover.
Everything You Need to KNOW
1.The Point of it all
For most of us, achieving some measure of financial independence is what we’re all working towards. Call it retirement, call it FI or financial freedom, most of us have a vision of one day being able to live life on our own terms. And for most of us, a large part of that is not having to work or run a business to provide for our financial needs.
This is the reason we’ve been saving and investing, paying down debt and clearing mortgages, piling money into pensions and ISAs. It’s the reason we haven’t spent every penny that’s come our way; why we’ve sacrificed the present day to some extent in favour of one day. Now we’re faced with the one day. We’ve made it. Everything we have worked towards is now right in front of us, welcoming us in.
For some of us, the realisation that we’ve made it and can finally retire will come as a shock. I’ve lost count of the number of clients I’ve worked with where they still thought they had to aggressively pursue wealth-building, and I was able to gently tell them that they had enough.
I even had one client couple who were planning to work another year or two after we’d done the financial planning exercise with them. Then one day, the chap had a terrible morning at work, full of hassles and annoyances. At lunchtime, he rang his wife and said he was thinking about quitting, knowing that he could do so safely. At which point, she told him that she’d had a terrible morning too, and HAD just quit!
For others of us, we’ve been intentionally working towards this end for some time and getting there feels like breaking the finishing tape in a marathon. We’ve seen it coming and pressed forward towards the prize, pacing ourselves perfectly along the way.
2. The Biggest Financial Transition of Them all
Of course, retirement isn’t an end point, it’s merely a transition. But it is easily the biggest, most profound financial transition any of us will face. Most people present to a financial adviser like me at a point of financial transition.
Maybe they’ve inherited some money, or sold a business, or they have a child on the way and want to look at this life insurance programme. Usually there is a financial trigger of some kind – very few people just wake up and think that they fancy a trip to their friendly local financial adviser.
When it comes to retirement, what a transition it is! We need to not underestimate it, but see it for what it is – a complete rethink of how we live and spend money. We transition from accumulating wealth to spending it, or ‘decumulating’ to use my favourite made-up word in financial planning! This is much harder to effect than most people think because it requires a mindset shift of an extreme kind.
3. Retirement is Exciting
Or it should be! All this talk of the significance of retirement shouldn’t weigh it down with responsibility. We mustn’t lose sight of the fact that retirement is meant to be the longest holiday of our lives, even if we’re still working, as long as working is what we want to do.
Personally, I can’t ever see me not doing anything constructive, plus I’m wired to look for ways to make or earn money and I can’t ever see that not being the case. But I don’t want to always be working at the pace I am now!
I want to do lots of things that I can’t right now because of the commitments – mostly work-related – that I currently have. I can’t wait to live life truly on my own terms, and I’m working hard towards it, while also enjoying the journey. And I’m guessing the excitement of getting there yourself is a primary driver for you.
4. A Word About FIRE
Regular readers will know I have a lot of time for the FIRE community; that is, those interested in the concept of Financial Independence Retire Early – FIRE. In this series I’m not really addressing the Retire Early part of that concept.
For most of us, retiring early isn’t an option. We’ll get there when we get there and that’s fine. I fall firmly in that camp – I’m in no particular hurry to achieve financial independence because I’m enjoying the journey too much.
It’s a generalisation, but achieving early retirement takes significant effort and sacrifice, and if that’s your thing the more power to you. For our purposes in this series though, I’ll be talking about FI and using that term interchangeably with retirement, but I’ll be skipping the Retire Early part altogether.
Retirement is a big deal and a massive transition, but it’s a joy, something we should be looking forward to. When we get there, we should celebrate. Whenever I work with clients and we say, ‘You’ve cracked it, you’ve achieved financial independence’, I always add, ‘I hope you crack a bottle of something nice tonight! You deserve it.’
What is Covered in this Blog Series?
This blog series is based on season 17 of the MeaningfulMoney podcast, and builds on a lot of the groundwork laid in season 16. That season covered the approach to retirement, and is also available as blog posts and an ebook. We look at some topics that are unique to those that have stepped over the threshold into retirement itself:
- The transition into retirement from a psychological and practical financial point of view
- Seeking advice from a professional, including a checklist
- Financial housekeeping that retirees should bear in mind – what to stay on top of so you enjoy your retirement
- Investing correctly in retirement, understanding behaviour and staying the course
- Risk in retirement
- Avoiding costly mistakes
- Settling in for the long haul
- The financial impact of losing your life partner and being prepared
- Estate planning: wills, powers of attorney and trusts, and potential landmines
- Multi-generational planning
- Long-term care
- Universal truths
Not Just for Retirees
It’s important that you understand that this is not just for retirees. If you’re 30 years old right now, you’d be forgiven for thinking that many of the subjects I’ve just listed are so far into the future that you need not worry about them just yet.
But I’m convinced that having a rounded, end-to-end understanding of your financial journey, and not just of the stage you’re currently in, will equip you well for decision-making in the present. Plus, if you have parents that are retired then you may be able to help them with some of these challenges.
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