Retirement Planning: Why It’s Time to Focus on Human Capital Over Financial Capital

The way we approach retirement is changing. Traditional financial planning has long centred on building financial capital—pensions, savings, and investments—to secure our future. But the cracks in this strategy are becoming harder to ignore. For many, it no longer holds up under the weight of increased life expectancy, economic uncertainty, and the changing nature of work. That’s why we need a new way forward: one that prioritises people over products, human capital over financial capital.

Planning the Client Before the Money

Traditional financial planning has a glaring flaw—it often treats the money as the client. The focus is on creating a portfolio of financial products to meet predicted shortfalls, often with the implicit goal of selling those products. But this misses the mark. Financial planning should be about the person behind the portfolio. It’s not enough to ask, “How much money will you need?” We must instead ask, “What kind of life do you want to live?”

A human-centred approach to retirement planning starts with understanding the client’s aspirations, values, and purpose. It’s about co-creating their “favourite future” and then finding ways—both tangible and intangible—to make it happen. Human capital development, the cultivation of skills, knowledge, and passions that generate future income or fulfilment, becomes just as important as managing financial capital.

The Challenges of Relying Solely on Financial Capital

For decades, we’ve been told to save into pensions and invest wisely to build a nest egg for retirement. But today’s boomers are discovering that financial capital strategies alone often fall short. Here’s why:

1. Longer Life Expectancies Retirees today can expect to live longer than previous generations, with many living well into their 80s or 90s. This means their savings must stretch further, making drawdown strategies increasingly precarious.
2. Decline of Defined Benefit (DB) Pensions Only 47% of boomers have access to DB pensions, which provide stable, lifelong income. Most rely on defined contribution (DC) schemes or the state pension, neither of which offer the same financial security.
3. Self-Employment and Under-Saving The rise of self-employment has left many boomers under-prepared for retirement. Without auto-enrolment or regular contributions, this group faces significant pension shortfalls.
4. Uncertain Economic Conditions The cost of living crisis, fluctuating markets, and rising rents have made financial planning increasingly complex. For many, home ownership—a traditional fallback in retirement—is no longer guaranteed.
5. Intergenerational Support Many retirees continue to support children and grandchildren, further depleting their savings.

With these challenges in mind, it’s clear that a “set it and forget it” approach to pensions and investments is no longer sufficient.

The Case for Human Capital Strategies

Retirement is no longer a fixed milestone but an evolving phase of life. For many, working longer—whether through necessity or choice—has become a reality. This shift opens the door to human capital strategies that blend personal fulfilment with financial stability. Here’s how they work:

1. Lifelong Learning and Skill Development Investing in skills that can generate income later in life—whether through consulting, part-time work, or creative pursuits—creates a safety net that pensions cannot provide. For example, retirees might monetise hobbies like writing, crafting, or teaching.
2. Flexi-Retirement Models Rather than fully retiring, many are opting for “semi-retirement,” combining part-time work with leisure. This hybrid approach not only provides financial support but also keeps retirees mentally and socially engaged.
3. Community and Volunteering Activities that leverage experience and expertise—such as mentoring, volunteering, or serving on boards—not only create societal value but also offer a sense of purpose and fulfilment.
4. Holistic Asset Management Planning doesn’t stop with financial assets. It incorporates the full spectrum of tangible and intangible assets, from property and savings to intellectual and emotional capital. Together, these provide a more resilient foundation for retirement.

A New Role for Holistic Wealth Planners

Holistic wealth planners play a crucial role in this transformation. Their mission is to treat clients as people, not portfolios, crafting plans that reflect their unique aspirations and challenges. By integrating human capital strategies into the financial planning process, they can help clients navigate the uncertainties of modern retirement with confidence.

This approach combines:

• Personalised Life Planning: Helping clients articulate their goals and explore paths to achieve them.
• Income Diversification: Blending financial capital with earnings potential and other income sources.
• Support for Intangible Assets: Strengthening networks, skills, and purpose to sustain a fulfilling retirement.

The Road Ahead: Empowering Clients to Thrive

The shift towards human capital strategies isn’t just a reaction to the shortcomings of traditional financial planning—it’s an opportunity. By placing people at the heart of the planning process, we can create a model that is more inclusive, adaptable, and empowering. It’s not about how much money you’ve saved; it’s about how you’ll use your time, talents, and resources to lead a life of significance.

For retirees facing uncertainty, this is a message of hope. The future isn’t something to fear—it’s something to create. And with the right support, you can design a retirement that isn’t just financially secure but also deeply rewarding.

So, let’s plan the client before we plan the money. Because in the end, it’s the person—not the pounds—that matters most.

Q&A: Rethinking Retirement Planning with Human Capital Strategies

Q: What’s the difference between financial capital and human capital in retirement planning?

A: Financial capital refers to your savings, pensions, and investments—essentially, the money you’ve set aside for retirement. Human capital, on the other hand, is about your skills, experience, knowledge, and passions that can generate income or fulfilment throughout your retirement years. While financial capital can run out, human capital offers opportunities to stay active, engaged, and financially supported by leveraging your abilities.

Q: Why should I consider human capital strategies for retirement?

A: Traditional financial planning often focuses solely on building a pot of money, but this approach has its limits, especially with longer life expectancies, rising costs, and economic uncertainty. Human capital strategies add another layer of security by creating opportunities for income, fulfilment, and purpose. They give you the flexibility to adapt to life’s changes and build a retirement that’s not only financially stable but also personally rewarding.

Q: Does focusing on human capital mean I shouldn’t save for retirement?

A: Not at all! Saving for retirement is still crucial. Human capital strategies are meant to complement, not replace, your financial capital. By combining both, you create a robust plan that balances financial security with personal growth and adaptability. Think of it as having multiple tools in your retirement toolkit.

Q: How can I use my human capital during retirement?

A: There are many ways to leverage your human capital, such as part-time work, consulting, teaching, or even monetising a hobby. You might also volunteer, mentor others, or start a small business. The key is to focus on activities that align with your skills, passions, and lifestyle goals while contributing to your financial or emotional wellbeing.

Q: What if I don’t want to work in retirement?

A: That’s perfectly fine! Human capital isn’t just about earning money—it’s also about staying engaged, finding purpose, and building resilience. Even if you’re not working, you might use your human capital to learn new skills, explore hobbies, or contribute to your community. The goal is to create a fulfilling and adaptable retirement.

Q: How can a holistic wealth planner help me with this approach?

A: Holistic wealth planners go beyond the numbers to focus on you as a whole person. They’ll help you define your goals, explore your passions, and design a plan that integrates both financial and human capital strategies. Whether it’s identifying ways to generate income, planning for flexible retirement options, or aligning your finances with your values, a holistic planner is there to guide and support you every step of the way.

Q: What are the risks of relying solely on financial capital for retirement?

A: Solely depending on financial capital can leave you vulnerable to unexpected changes, like living longer than expected, market downturns, or rising living costs. By integrating human capital strategies, you create additional streams of income and opportunities for personal growth, making your retirement plan more resilient and flexible.

Q: How can I start incorporating human capital into my retirement plan?

A: Start by reflecting on your skills, interests, and the kind of activities that bring you joy and purpose. Think about how these could generate income or fulfilment during retirement. A holistic wealth planner can help you explore these options and integrate them into a comprehensive plan tailored to your unique circumstances.

Q: Is it too late to focus on human capital if I’m close to retirement?

A: It’s never too late! Whether you’re nearing retirement or already retired, you can still identify ways to leverage your human capital. From part-time work to new hobbies or mentoring opportunities, there’s always a way to stay engaged and create value for yourself and others.

Q: What’s the first step in creating a retirement plan that prioritises human capital?

A: The first step is to focus on you. Take time to define your “favourite future”—the life you truly want to lead in retirement. Once you’ve clarified your vision, work with a holistic wealth planner to create a plan that combines financial and human capital strategies to make it a reality. It’s about planning the person first, then the money.

Q: How does this approach benefit me emotionally, not just financially?

A: Prioritising human capital helps you stay active, engaged, and fulfilled during retirement. By aligning your plan with your passions and values, you build a sense of purpose and connection that goes beyond financial security. This can lead to better mental health, stronger relationships, and a more rewarding retirement overall.

By combining the strengths of financial and human capital, you can create a retirement that’s not just about surviving but thriving. If you’re ready to take the next step, let’s start planning your future today!