You have woken up on your 55th birthday and realise that you dislike your job. You don’t ‘hate’ it, but it’s certainly missing something you can’t quite put your finger on. The daily grind has got to you. Family commitments meant that you carried on working hard and putting in the hours – after all, the school fees and holidays abroad had to be paid for somehow. But times are changing.
AGE 55 – “RETIREMENT” BEGINS WITH A CAREER CHANGE
You’re going to quit the job you ‘had’ to do and take the job you ‘want’ to do. Your children have finally flown the nest and are beginning to stand on their own two feet so this is the opportunity to pursue your passion. It doesn’t pay nearly as well, but that’s ok - through working four days a week and occasionally dipping into your pension, you can afford this lifestyle. You’ve taken advice on this and with the help of cash-flow modelling, you can see that it’s achievable. You can take an extended holiday to visit the family in Australia but not before finally realising a life dream of seeing the Northern Lights.
Plus, it gives you the chance to really focus and work on your tennis game.
AGE 65 – AN ACTIVE RETIREMENT
While working still has a certain appeal, you’ve now reached a position of complete financial independence. You mull over your options before finally deciding that you’re going to be far too busy with enjoying life to have a job as well. After all, you’re about to spend the next six months travelling around the world (you feel a cruise is much more civilised than backpacking). This costs quite a bit but you can use the rest of your pension tax-free cash to pay for it. The rest of the pension can cover your day-to-day living.
Once you’re back, you get to spend more time on what you really enjoy. Your tennis serve is as quick as it’s ever been, and you’ve started learning a bit of Mandarin for your next holiday.
AGE 75 – THE RETIREMENT SLOWDOWN
You’ve been “retired” for 20 years now, and you’re just starting to slow down. You’ve travelled extensively and seen many weird and wonderful things, but now you’re beginning to appreciate the Great British holiday. You remember how much you enjoyed day-trips to the seaside and strolling along the pier. You enjoy spending more time looking after your grandchildren (and giving their parents a break!) There are fewer “big expenditures” now and your lifestyle becomes more settled.
Getting around the tennis court becomes harder as the hip starts to stiffen.
AGE 85 – THE RESTFUL RETIREMENT
At last you have the chance to slow down a bit! You enjoy taking your time over things now – you’ve had the opportunity to catch up on your reading list and you enjoy being able to spend time watching the local cricket team. Your expenditure is as regular as clockwork and you don’t really want to have to think about “investments” any more. Simplicity is important to you, as is planning your legacy. Your thoughts have begun to turn towards meeting care home costs, should you need them.
You still get out to play tennis every so often, but you find it quite a challenge now. Your health is broadly alright, but there are a few more aches and pains than there used to be.
MY QUESTION TO YOU
What has been consistent throughout this story? Lifestyle has changed, expenditure has changed, priorities have changed. The consistent factor throughout has been you, enjoying your retirement the way you wanted to.
In each chapter of your retirement, your pension has served a different purpose – from supplementing your earned income, to paying for the “holiday of a lifetime”, to providing you with security in your dotage. Your story has been paid for by a combination of tax-free cash withdrawals, capped income drawdown, annuity purchases and enhanced annuity purchases.
And at each stage, thoughtful and considered advice has meant that you have been able to enjoy your retirement to the fullest.
Our financial planners would be happy to speak to you about planning for retirement, please contact us on 020 3553 3977 or email us.
This article was previously published on Tilney prior to the launch of Evelyn Partners.