Have you ever taken the time to think about how much money is needed to support you and your family for the rest of your lives? Or what life looks like when you have reached that magical amount?
When people have enough resources to support them for their remaining lifetime, we say they have reached financial independence. This means that they need to no longer work if they do not want to and can stop once it is no longer enjoyable. Quite often most people do not reach this, due to not planning for their financial future early enough.
But how do we work out, how much is enough?
You need to spend time working out what life looks like when you stop work. Have you got any places you’d like to travel to? Maybe you’d like to do some volunteer work? Or perhaps there’s something you’ve always wished to take up as a hobby.
The lifestyle decisions that you make above will determine how much you need to have saved as some of these can be expensive. If you have exotic travels plans, this will cost more than if you want a fairly low-key lifestyle focused around spending time with family / looking after the grandchildren, etc.
What existing resources do you have and what other financial vehicles might you need to help you in your financial planning?
This may include cash savings, pensions, and investments, and these products may change as you move from pre-retirement to post-retirement. This is where you may need help choosing which are the right vehicles to help you at each stage.
How long are you expected to live for?
The Office of National Statistics has a life expectancy calculator where you can pop your current age in and it will tell you the average life expectancy for a person of your age.
As financial planners, we see people living longer than average all the time and we will often plan to at least age 100 (sometimes 110 if a client wishes us to be extra cautious or if their parents lived long lives themselves). So when you are working your numbers out, it would be prudent to do the same.
Think about what you want your legacy to be.
Do you want to help your children out whilst you are alive to see them benefit from any financial support? Maybe you want to gift to charity whilst alive so you can see your gift being put to positive use. Perhaps your children are well set up already and you want to spend your savings yourself and have no wish to pass anything particularly over to your beneficiaries. Maybe your children would rather you spend your wealth and enjoy yourself while you can.
The above will have an impact on how your financial future may look and are really important to consider.
Once you have made these decisions and worked out your numbers, make sure you follow your plan and make sure you enjoy yourself doing so. There’s no point in planning if you can’t.
If we can be of any assistance with your planning, please do get in touch, and please download our retirement checklist to help you get started with planning for your financial future.
Risk Warning - A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates, and tax legislation.
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