By: Kim Potgieter, Director and Head of Life Planning at Chartered Wealth Solutions
Have your considered what life will look like in retirement? Visualising this chapter is essential to retiring successfully. We strive to be financially secure, yet many neglect planning for what they will do in retirement. Studies now show that the average person can expect to live 30 years longer.
Planning ahead for this life transition, and involving your significant others, should start well before retirement age. Being financially and emotionally equipped is key to successful retirement.
Retirement is a time for growth and fulfilment. In my book, Retiremeant – get more meaning from your money, I define retirement as a time when you make unfulfilled dreams and goals a reality, on your terms, and in your own time.
Given that this chapter makes up a third of our lives, very few can afford to end work, and modern retirement often brings additional responsibility with many caring for ageing parents and adult children.
It does seem likely that people will no longer retire. They will work less, on their own terms, and engage in meaningful activities in all areas of life, including relationships, learning, giving back, health, purpose, and fun.
Retire to and not from
Retirement should be something you do on purpose. Instead of being ‘pushed’ into retirement, would it not be much more fulfilling to be ‘pulled’ into something that you want to retire to?
The process starts with visualising what your ideal retirement looks like. Establishing goals is the first step. Once you know what you want, start planning your finances to enable your Life Plan.
Holistic Financial Planning should include a Life Plan, Scenario Plan, Investment Plan and Estate Plan that together ensure that your investments, risk and Estate are integrated into your goals. This provides context for what your money is for – your life and money are intertwined.
Advice for retirement planning from my learnings
1. Scenario planning
There are three things that you can control in retirement: how long you work, how much you spend, and the level of investment risk.
Retirement looks different for everyone. Some want to travel, some relocate to the sea and others to a retirement home. Each scenario has individual financial considerations.
The challenge is funding this phase for an extended period. The top concern of people nearing retirement is outliving their savings and relying on their children. This is followed by: what will I do with my life? Scenario planning will guide how long your money will last.
Find a Financial Planner to assist with scenario planning. They will analyse future possibilities based on assumptions of life expectancy, spending, ROI, inflation and other sources of income. This information puts you in control to plan for variables, such as how long you will need to work, what you can spend and the investment return you need.
2. Plan to live to 100
With modern medicine, we now live longer. Many of us are caring for elderly parents who are living well beyond expected age. This places financial and emotional burdens on families.
3. If investment returns seem too good to be true, they probably are
Before buying investments, do your research. Trust your instincts and consider who is selling the investment. If the return seems exceptionally high, or you have to borrow to invest, stay away. Make sure you are invested in quality, diversified funds.
4. Work re-invented
An increasing number of people are opting to continually engage in income-producing activities. Many negotiate to retire at a gradual rate, rather than exiting completely. Others are carving out new work avenues, using their skill, talent and wisdom to supplement their income. Work may mean volunteering or simply expressing creative talents. Whatever this world of work looks like to you, prepare for this transition in advance.
5. Draw up a spending plan
I have found that many retirees struggle to spend their retirement funds, fearing running out. A budget creates limitations and sacrifices, while a spending plan directs your money, time and energy to that which matters most. The hard earned money can now enable the life envisaged with thought and consideration.
Your spending plan must be based on real numbers as it affects the accuracy of your Financial Plan.
6. Plan in advance
Most people put more into planning that annual holiday than into planning retirement. A financial plan is not enough. Money is a means to having the life you want, but it is up to you to envisage – and then execute – what you want your life to look like.
This means taking an active role in your retirement, planning ahead and not setting limitations on what you can achieve.