Guest Post: The Three Most Important Retirement Questions
Today I have a guest post for you from James Mackay, a certified financial planner and regular reader of Pounds and Sense đ
In his article below, James addresses an issue that will be real and pressing for many readers of this blog – how to prepare for retirement and enter it successfully.
Over to James then…
If youâre starting to think about your retirement, these are three important questions that you need to ask.
1. Have You Had Enough?
Itâs Sunday evening and youâre winding down after a busy weekend with friends and family. As you sit back in your favourite chair and think about the week ahead, you canât quite get comfortable.
The thought of going back to work on Monday morning makes you feel a bit uneasy. In fact, the thought of doing it for another 5â10 years makes you feel sick!
If youâve ever experienced this, you might be approaching the point where youâve had enough (thatâs a technical term).
The question you need to ask yourself is whether the pain of going to work outweighs the benefit. If you find yourself in this situation; where youâre emotionally, physically and mentally drained and no longer excited to perform at the highest level, itâs time to do something about it.
Having had enough doesnât mean that itâs necessarily time to retire. It simply means that you need to change the status quo.
Maybe youâve had enough of your current role, but youâve got more to give in another capacity. Your years of wisdom could be very valuable in a different guise. Perhaps youâve had enough of having a boss and are ready to go it alone. With the years of experience, itâs no surprise that over 50s are the best entrepreneurs. Or maybe youâre happy to carry on but just want a little bit more flexibility around what you do and when you do it.
These are all useful options to explore, particularly if you havenât got enough to hang your boots up yet. Sometimes, the benefit of working for âjust one more yearâ can make a real difference to your financial situation.
2. Do You Have Enough?
If youâve had enough, and are ready to move onto pastures new, the next question is do you have enough?
Whenever I ask this question, people start telling me how much theyâve got saved up. But theyâve got it all wrong. Itâs like trying to build a house without the seeing the floor plans. You need to start with the end goal and work back from there.
Working out if you have enough requires knowing:
- Your monthly number â this is how much a comfortable lifestyle is going to cost.
- Your monthly income â this is how much income youâll receive from the State Pension, final salary pensions, buy to let properties, etc.
- The gap â this is the difference between the two, and where your savings come in. Broadly speaking, if youâve got 20x the gap in savings, you should be fine. Any less and you might not be quite there yet.
But, thereâs more to retirement planning than just simply figuring out your ‘number’. Finding your purpose in retirement sounds wishy-washy, but without a clear purpose youâre likely to be one of the 25% of retirees who return to work.
3. Will You Have Enough to Do?
You need to ask yourself what you are going to do when you wake up on that Monday morning, free from the ties of work, and how are you going to fill your time.
If for the last 40 years youâve been busy being busy – chances are youâre going to get pretty bored sitting around the house for 40 hours a week. Iâve seen many successful individuals retire, only to get bored and return to work within five years. The newly-found free time that retirement provides can be overwhelming for some.
Retirement is about having enough money to sleep at night and enough purpose to get up in the morning. Itâs not just about the numbers, itâs about how youâre going to spend your time. Purpose will drive you in retirement, money will fund you. Try not to get those two mixed up.
The bottom line is this⌠retirement is the biggest transition youâre ever going to make. Itâs not the sort of thing you do regularly and not the sort of thing you want to get wrong. By asking yourself these three questions, youâll improve your chances of achieving a successful retirement.
Byline: James Mackay is a Certified Financial Planner at Frazer James. He has helped hundreds of clients to achieve financial independence and retire with confidence, clarity and purpose.
Many thanks to James (pictured above) for a valuable and thought-provoking post. As a semi-retired 63-year-old myself, I can identify with all of the points he raises.
Actually I think there is a strong case for phasing your retirement if possible, maybe reducing the number of days per week you work initially and/or moving to a less pressured role. This can make retirement feel more like going on an interesting journey rather than driving over a cliff!
I also think there’s a good case for continuing to do some work you enjoy during the early years of retirement at least, to boost your income, provide social interaction, and keep your mental and physical faculties sharp. Of course, voluntary work can do this as well (apart from boosting your income, which may or may not matter to you).
If you have any comments or questions about this article – for me or for James – as always, do feel free to post them below.