4 ‘Must Do’s’ For a Safer Retirement…
Step 1: First Things First…
Where do you start with all this then? Well, you need to know what the end game is. By that, I mean, what do you want your retirement to look like.
What do I want to do with my time?
Where do I want to visit?
Who do I want to see more of?
What’s my ‘routine’ going to be?
These might sound like straighorward questions but, for a lot of people, they’re not! Transitioning in to retirement isn’t just about the money. There’s all sorts of issues that get thrown up and the questions above are just some of them.Get a clear idea of what you want retirement to look like for YOU! Even if you’re already retired, you can still ask yourself some important questions:
Is retirement panning out as I hoped it would?
Are there things I haven’t yet got round to doing?
Could I be spending more time with the people who are important to me?
If I die tomorrow, what will I have regretted not doing? Sorry, I know that’s heavy!
Questions, questions, questions… but they’re all very important ones! Remember, LIFE’S NOT A REHERSAL! Do as much as you can while you’re fit and able to do so.So, hopefully, you’ve got a reasonably clear idea of what you want your retirement to look like. If you’re still a bit vague, no problem, most people are!You see, retirement is a process, not an event. It usually takes time to settle in to it, so you’re not alone if you’re struggling with this. Just get an idea and see what happens!
Step 2: What Will It All Cost?...
Now you’ve got to add some numbers in to it. Look at what you’re spending at the moment and break it down in to categories such as:
Domestic: council tax, gas, electric, food, pets, broadband. (The boring stuff!)
Personal: holidays, clothing, hobbies, going out. (The fun stuff).
Family: the cost of helping family out.
Servicing debts: you might still have a mortgage or credit card balances.
Motor / travel: we all need to get around and there’s a cost to this.
Investment & insurance: could be medical insurance, pet insurance or regular savings.
Professional fees: maybe an accountant and you’re likely to still visit the dentist!.
As you’ll see, there’s quite a lot of detail but there’s no way of getting around it. Life can be expensive and you need to know what yours costs!Don’t get bogged down in trying to get things to the penny but you’ll want to be reasonably accurate and you’ll have a good idea if what you’ve estimated is broadly correct or not.
Step 3: Can You Afford It?...
Now it’s crunch time. You know what you want your retirement to look like (or have had a decent idea) and have had a stab at working out what it will cost. But can you afford it?!Work out what ‘guaranteed’ income you can rely on which is going to be things like any final salary pensions through work, your state pension, annuities and, perhaps, buy-to-let income. These are guaranteed incomes that you can rely on for the rest of your life.Next, you need to tot up all your other resources. This will be things like pension funds, savings and investments. This money will be needed to cover the difference between the cost of the lifestyle you want (or want to keep if you’re already retired) and the guaranteed income I’ve just mentioned.If you make a few assumptions on things like inflation and what sort of growth you might get on your invested money, you should be able to work out if your other resources are going to outlive you or the other way round!It’s at this point that you either sit back and relax, knowing that you’re going to be OK or you fall off your chair from the realisation that you might well run out of money. Either way, it’s important that you know before it happens so you can do something about it.
Step 4: How Wrong Were You?...
Sorry to break this to you but I can pretty much guarantee that all this work you’ve been doing and all your figures are going to be wrong! It’s not an exact science I’m afraid. Life just doesn’t pan out as we hope and the assumptions we make are almost always wrong.But that doesn’t matter. The key is to have a good idea of where you’re heading. By repeating what I’ve set out on a regular basis, you’ll be able to adjust course as you go along, perhaps when you realise you spend more than you thought on cat food or if the dentist is getting far too much of your money!Small adjustments as you go along are far easier to make than massive ones every few years. Never think your plans are correct. NEVER. If you invest some time on a regular basis on this stuff, you’ll be able to put it away and carry on enjoying your life without worrying. It’s that simple.
Feeling Better?
I’m not sure if this blog has been of any help to you. I hope it has because that’s why I wrote it! This is important stuff. With planning and clarity, I’ve seen people live their lives with a great deal of freedom, knowing that the money side of things is taken care of.It’s up to you what you do, but please promise me, you won’t just guess about your future. You might be fine and you might not be but waiting until you get there before you find out really isn’t the most sensible thing you could do!Until next time…