As life expectancies continue to increase, many of us will celebrate our 100th birthday one day. We can’t predict how long your money will need to last but there are some things to consider before commencing your retirement:
Pinpoint your Planned Retirement Age
The longer you work, the less time your money will need to last but you should be realistic about your expected goals. Even if you’re hoping to live to 100, you needn’t put off your projected retirement age or be discouraged about starting your retirement early. You might be anxious about how much you will need, but the likelihood is that you won’t need your finances into your 100th year. In all scenarios, early planning is key in determining your planned retirement age.
Plan Your Retirement Goals
Deciding how you might spend your retirement is an important part of futureproofing your finances. You might want to travel the world, which would require considerably more disposable income than enjoying the garden, taking up a new hobby or spending time with grandchildren. If you wish to pass on wealth to your family, you should consider this carefully as part of your planning.
Ticking off the “bucket list” items while still leaving a nest egg for family members can be difficult if your goals are unclear. It can be difficult to predict how your needs and goals could change in your later years; Waverton Wealth can assist in demonstrating the effects of your decision-making and aid in signposting any events that may not be within your control.
Forecast Your Income
Predicting how much income you need in retirement has challenges. Initially, you may require a higher income to meet goals you have postponed during your working life. As retirement progresses, you may spend less for many years before reaching an age where long-term care becomes a consideration. After working hard for decades, you will no doubt want to enjoy your newfound freedom. Professional advice can be key in unlocking a mapped-out plan to cover most eventualities.
Consider All Your Investment Options
As with all investments, the time you spend in the market is more valuable over the longer term than trying to time the market. A well-diversified portfolio helps your money to grow over the long term and cash-based savings can play an important part in your overall retirement strategy. However, the right amount to retain in savings (especially when the typical rate of return is less than the rate of inflation1) depends on your foreseeable capital needs. Consideration needs to be taken when drawing on your investments, as there are tax benefits and drawbacks to different approaches. One thing to remember: all taxes, thresholds, and allowances interact with each other in one way or another. Meaningful financial planning can determine the optimal retirement strategy for you and your goals.
1. Article written in June 2022 when CPI is currently 9.0%, and Bank of England base rate is 1%.