How to Retire Successfully

Retirement – A ‘New’ Chapter

The traditional notion of retirement as simply a period of rest or leisure following a life of full-time work is increasingly being challenged. With increased lifespan, many people are seeing retirement, not as a destination but a new chapter in their lives that they want to make as fulfilling as possible.

A recent study by Edward Jones, a large US financial services company, and Age Wave, a US thought leader on issues relating to an aging population, identified four interconnected pillars that form the basis of a successful retirement. These are: Health, Family, Purpose and Finances.

Throughout my career advising clients on retirement planning, I can see how these pillars have shaped some of my discussions and I thought I would take a closer look on the impact that these four pillars can have on a successful retirement. We will look at them in reverse order.

Finances

For many clients, one of the biggest challenges they face is the psychological shift from relying on their salary to meet their expenditure needs to relying on an income generated from their accumulated capital. In other words, the classic dilemma is, ‘do I have enough capital saved to give up work?’

This is where lifestyle financial planning can play a pivotal role. Given that retirement can last 30 years or more, it is important that clients make provision for this and that, using reasonable assumptions, they can be reassured that they are financially independent and that they can outlive their money.

In the Edward Jones’ study those retirees who rated themselves the happiest and most fulfilled had started saving for retirement in their early to mid-thirties and over half were currently working with a financial adviser.?

In my experience it can take several years of planning to successfully transition into retirement. It is often not as simple as stopping work on a Friday and putting your feet up on the Monday (unless that is what you’re aiming for!). Often retirement involves phasing down from work, perhaps, working part-time for a period of time. It could mean taking on a consulting role or becoming a non-executive director.

It can take a while to become comfortable with the notion of stopping work and relying on your accumulated capital.

Purpose

Increasingly, having a purpose is seen as the key to a successful retirement, however, it is extremely difficult to define what this might be.

I have advised clients who have often reached the pinnacle of their career as, say, a Solicitor, Management Consultant or senior business leader which often means they manage a large team, are responsible for setting business strategy and are frequently the ‘go-to’ expert within their firm. This is essentially their identity and their purpose and quite often clients fear losing this identity once they have retired. This is why having something to retire to is so important although this might take some time to figure out.

Retirement often means having more time so the pressures of having to commute to the office to work at a desk for 12 hours or more can fall away. However, for many clients the drive to contribute and to use their skills persists and so many consider a consultancy or non-executive role. Others look to the voluntary sector, perhaps as a Trustee or mentor.

Purpose can also be associated with legacy and the desire to make the local community a better place or improving the local environment. It can also involve travelling more, enjoying longer holidays, enrolling in further education, DIY, more time for hobbies or even time to reflect and do nothing.

Family??

Many clients I work with cite spending more time with their family and friends as being one of their key retirement goals. Indeed, having close social connections is said to increase longevity.

Again, the decision to spend more time with friends and family requires a degree of planning. I remember having a conversation with a successful solicitor and his wife and he was very much looking forward to spending more time with his wife in retirement. The problem was that his wife already had a very full social life and so a degree of compromise was needed. Too often friendships can be neglected whilst clients juggle a busy career and hectic family life and re-kindling old friendships might take time.

Health

The good news is that we are living longer but it is important that increased lifespan comes with increased healthspan. According to the Edward Jones’ study, in the US the average American spends the last 12 years or more of their life curtailed by illness, injury or cognitive impairment.

It is easy to see why maintaining a healthy mind and body is a fundamental pillar of a successful retirement. Many clients have free health checkups as a benefit package at work and whilst expensive, many people decide to continue these once they retire.

We can do as much as we can to be healthy but the worse does sometimes happen. As clients transition into retirement it is often a good time to review their Wills and look to a wider estate planning strategy.

Conclusion

We should review retirement as a milestone on life’s journey rather than a destination. Retirement affords more time often free of the constraints of deadlines and demanding colleagues and clients.

The ‘four pillars’ are useful for promoting discussion but I know of few retirees who had it all figured out at retirement. To thrive in retirement requires a degree of preparation and then flexibility and having sufficient financial resources to enable you to live your desired lifestyle. This is where, I believe, lifestyle financial planning can help enormously.

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If you would like to begin preparing for your desired lifestyle in retirement, please do get in touch.?