Working with clients approaching or in the early stages of retirement over the past decade, I’ve identified 7 things individuals and couples would benefit from doing right now.
These are essential personal finance steps, many of which don’t require the professional services of an Independent Financial Planner.
Each of the 7 steps described below involve a little work on your part, although the effort is tiny in comparison to the benefits of ticking each item off your list – or the consequences of failing to address them in time.
Here are my 7 things you should do right now if you’re approaching retirement or in the early stages of retirement.
1 – Put yourself first
Increasingly we find the post-war generation are also part of the ‘sandwich generation’. Trapped between the demands of adult children and elderly parents, it is easy to find a comfortable financial position placed under great pressure.
In retirement, you need to put yourself first and secure your own lifestyle, before committing to help children or parents secure their own. This can mean making some difficult decisions and sometimes saying ‘no’ to what might at first glance appear to be reasonable requests.
The best way to put yourself first is to get a comprehensive Financial Plan, quantify precisely what you need in terms of income and capital to secure your desired lifestyle in retirement, and then gift or loan money to family based on the knowledge you can afford to give it away.
2 – Diversify your investment portfolio
During your working life, it is entirely reasonable to have an investment portfolio consisting largely of equities. Exposing your money to equity risk makes sense over the long-term as history tells us company shares tend to outperform cash, bonds or property when time is on your side.
As you enter retirement, you should consider diversifying the contents of your investment portfolio. Rather than holding everything in a single investment asset class, invest broadly across a wider range.
This helps to reduce risk without adversely reducing the prospect for returns. It is likely to result in reduced volatility from your investments, which will result in fewer sleepless nights worrying about the vagaries of the stock markets.
3 – Consider the cost of long-term care
The area where I spend most of my working life is helping clients plan for the cost of residential care fees. In my experience as a care fees planner, most people massively underestimate how much this expense is going to be in the later stages of retirement.
We’ve seen retirement plans severely compromised by the cost of care; it costs on average £563 a week to provide residential care in England, with big regional variations in these costs which can easily see £3-4,000 a month spent on quality residential care in Surrey.
It is never too early to start thinking about the cost of care in later life, along with your preferences for how this care is provided. You might want a family member to provide care when you can no longer look after yourself, bring care services to your own home or move to a residential care home.
Plan ahead and even consider choosing your preferred residential care home before you reach the stage in life where you actually need it.
Download our free care fees planning guide
4 – Make a will and get a Lasting Power of Attorney
By the time you reach retirement, there is no excuse for not having a valid will. Without one you will die ‘intestate’ and the government will take care of the distribution of your assets; not a particularly pleasant surprise for a grieving family.
At the same time as making a will, get yourself a Lasting Power of Attorney. These allow others to make financial or welfare decisions on your behalf should you lose mental capacity in the future.
The alternative is your family having to apply to the Court of Protection, which can be a lengthy and expensive process, when you no longer have the ability to make your own decisions. With cases of dementia on the rise in the UK and forecast to exceed one million by 2025, it is a sensible and inexpensive planning step to get a power of attorney before you need one.
Download our free estate planning guide
5 – Insure or repay all of your debts
More people are entering retirement with debts, often as a consequence of starting families or getting on the property ladder at a later stage in life. There is absolutely nothing wrong with having debts in retirement, as long as they are affordable and properly managed.
In the first instance, you should make sure all of your debts are insured so they can be readily repaid in the event of your death. Term assurance is relatively inexpensive even in retirement, as it covers debts for a known length of time which is likely to be shorter than your own life expectancy.
As well as insuring debts, put in place a plan to repay all of your debts so you can focus that money instead on achieving more important financial goals – even just so you can stop stressing about the burden of debt and start to enjoy retirement to its full.
6 – Chat to your family about death
As you enter retirement, death can still feel like a very long way in the future. With rising life expectancies, it probably is. But talking openly about death is a very important thing to do as you approach or enter your retirement.
This is not only about thinking about the cost of funerals or how your assets will be distributed when you die, but communicating your preferences for end of life care and burial or cremation.
Death has long been seen as a taboo topic, not something we openly discuss around the dinner table. With the advent of Dying Awareness Week and even Death Cafes (where people go to drink tea, eat cake and talk about death), dying is being embraced as something worthy of discussion.
7 – Have a plan for the next thirty years
Retirement today is very different to retirement of a generation ago. Rising life expectancies mean we can expect an average retirement to last twenty or thirty years (or longer).
More time spent in retirement means higher costs to fund that period in life, especially as price inflation has a bigger impact over longer periods of time. Inflation of 2-3% a year has little impact over a decade, but try compounding it over 20-30 years and most fixed income will struggle to keep up.
Longer retirements are not only about incomes and investment, but considering how you will actually spend that time.
The clients we work with tell us that sitting at home watching TV or reading books is not very appealing as a way to spend a retirement after a lifetime of productive employment or business ownership. Look at options for volunteering, charity work or membership of local activity groups including U3A.
I hope you found this post useful and these 7 things you should do right now have given you some practical ideas for action.
If you would like to plan for a meaningful and affordable retirement, please do get in touch and arrange a meeting which is at our expense and with no obligation. You can call us on 01483 274566, email hello@icl-ifa.co.uk or complete our online enquiry form.
Retirement presents a great opportunity to fulfil all those things you want to do with your life, and with proper Financial Planning this is usually possible with the support of the necessary finances.
We look forward to hearing from you soon and helping you plan for a successful life in retirement.
