One of Glasgow Wealth’s Financial Advisers, Ian Brunton, discusses planning for retirement and one of the most common and pertinent questions we are asked by clients – can I afford to retire?
Can I afford to retire?
This is a question we often hear or a variation of. The simple, yet Socratic response is how much will it cost? Typically, this is where the conversation breaks down as this question is answered with a numbing silence.
It was once common place to serve a lifetime of loyal service with a company until you were 65 years old. Your salary would be replaced by a generous pension, often 2/3rds of your salary which would be shored up by the state pension. These secure and inflation proofed sources of income would provide the peace of mind needed for a comfortable retirement. There was little choice and fewer options but this met the simplicity of our requirements.
“We are no longer accepting retiring on the terms of our employers. We are no longer receiving such generous pensions.
The landscape has changed dramatically, the demarcation of being “old” has become blurred and the notion of retirement has changed along with our aspirations. With advances in modern medicine, we are living a lot longer than before and our retirement years are lasting 10, 20, 30 years and beyond. This can be as long as our working life so increasingly we are pursuing the things we wanted to do that perhaps family and work commitments prevented us from doing. We are no longer accepting retiring on the terms of our employers. We are no longer receiving such generous pensions. The sense is that the possibilities in retirement are expanding dramatically, as are our concerns.
“Life expectancy at older ages continues to increase meaning our pensions need to last longer”
Life expectancy at birth (1841 to 2011) – Office for National Statistics
With the sanctuary of final salary pensions all but gone for most, we are relying on our savings to foot the cost. The amount of savings required will be driven mainly by two things 1. your aspirations and quality of retirement you intend to have and 2. how long it will need to last. Two questions fraught with many uncertainties and doubt.
These unknowns are the main causes of anxiety when thinking about retirement and often the root of the silence when faced with the initial question. An effective use of planning at this stage can help alleviate some of these concerns and give confidence you are entering this stage of your life with a degree of assurance.
ONS Life Expectancy Calculator
When you come to put your plan together, a good place to start is by working out the fixed costs you will experience such as council tax, energy bills and sustenance and how these may change over time. Next you should focus on the variable costs like running a car, media packages, eating out and so on. Being able to secure these costs will give you peace of mind so you are not worrying about getting through to tomorrow.
Finally and what it has all been about is being able to do the things you want to do when you want to do them, ultimately what you have been working for all this time. If you are able to allocate a price to this then even better. By removing as many of the unknowns as possible makes the starting question less daunting and soon your plan will start to take shape and direction.
This of course is a relatively simple approach and with work and retirement no longer being viewed through the lens of a binary, tools-down approach, we need to embrace a longer transition of retirement, somewhere between the ages of 50 – 85 and beyond. Furthermore, how we intend to spend this time in our lives and what we value.
Creating your plan and using the right instruments to deliver can become fairly involved. As such, the proper advice can add tangible value. If you would like a confidential, no-obligation appraisal of your current circumstances, please get in touch to make an appointment.
How we can help
We specialise in helping you to plan for your retirement. Whether specific pension advice or more general retirement planning – we can help guide you through your retirement options.