One of my clients was contemplating her retirement when we met last week.
“When do I need to tell my employer that I’m retiring?”
“What’s your notice period?”
“One month.”
“Then you only need to tell them a month before you retire.”
“But you need to tell me much earlier than that.”
“When?”
“Seven years before you retire, ideally.”
So, you need to tell your retirement planner a long time before you say those words to your employer!
Tell your employer you're going to retire a month before it happens. Tell your Financial Planner at least seven years before! Share on XIf you have a half-decent Financial Planner, they should have a good idea of when you want to stop work a lot more than seven years before you do, however.
There’s a good reason why you need to give your Planner so much notice.
Nowadays, most people’s retirements are funded, in no small extent, by investments of one form or another. By the time you stop work, the strategy for your investments will need to have changed from generating capital growth to funding spending.
It’s unlikely to be best to change this strategy on the day, week or month you retire; after all, the investment markets don’t care when you are going to retire.
You can, of course, change the strategy of your investments to spending some time before you stop work, and merely reinvest the money you were going to spend.
Stockmarket and other asset cycles can be up to seven years long, so you should be prepared to change your strategy well in advance of retirement.
Our experience is that retirement dates evolve as time goes by.
When most people first meet with a Financial Planner, retirement is usually a long time in the future. As a result, you’re unlikely to have specific retirement plans, so you tend to go along with a date that someone else (like your employer, the government or your parents) have suggested.
That’s why so many pensions are set up with a retirement date of 60, 65, or 67.
But as retirement comes nearer, the intended date of your departure from the workforce is likely to change – many couples want to retire at the same time, financial changes have an impact (children can be more expensive than expected, and you may inherit), and you may even find that you don’t actually want to stop working.
There may also be changes beyond your control – the increase in life expectancy, combined with the shift to investment-linked retirement funding, have had an enormous impact on the retirement plans of the baby boomer generation.
As retirement nears, the process of retirement also becomes an important consideration.
When we are first asked about retirement in our 20s or 30s, we usually imagine it as something that happens on one day. This type of retirement occurs far less than it used to.
The self-employed usually take several years to stop work, and it is increasingly common to slow down into retirement.
It is essential to make sure that the providers of your retirement savings, and, in particular, of your pensions, are kept informed of your plans for retirement.
Many pension plans ask you when you want to retire when you first take them out – with workplace pensions, this is likely to be in your 20s, or sometimes even earlier than this. They then assume that your retirement plans will remain the same, and their investment strategy won’t change, unless you tell them otherwise.
I certainly wouldn’t like the 25-year-old Philip Wise controlling my retirement plans now!
So, get a Financial Planner who asks you about your retirement a long time before you retire, and make sure you review your plans for retirement.
Be prepared to change your investment strategy for your retirement savings as much as seven years before you retire.
It’s more important to give early notice of your plans for your retirement planner than to your employer!
