Three retirement questions you need to ask this Talk Money Week

The prospect of retirement can be incredibly exciting. For many, it’s the culmination of years of hard work, offering the freedom to pursue opportunities such as travel or hobbies that have previously had to take a back seat.

But it’s also something that generally feels very far away until it’s imminent. It’s not uncommon to have a foggy idea in the back of your mind as to what retirement will look like, rather than a crystal-clear vision of your plan, both lifestyle and financial.

Talk Money Week is the perfect opportunity to discuss retirement, and here we’ll go through some expert tips on questions you should consider. Not only will it help you gain a better understanding of what retirement means for you, it will also narrow down how much money much you need to retire.

Before you can start to think about how much money you need to retire, you need to know what retirement means for you.

Mickey Armstrong, financial planner, Evelyn Partners says, “Throughout your working life you exchange time for money. When you retire, you start exchanging money for time. One of the most important aspects of retirement planning is understanding what you’re going to do with that time, because it has a significant bearing on the rest of your financial plan.”

So, the first question you need to ask is how you plan to spend your time when work isn’t taking 35+ hours per week. If you have a partner, this is a great conversation starter to ensure that your ideas for retirement align.

There are three main areas most people want to consider:

Leisure

Leisure time is almost certainly one of the big-ticket items when it comes to this question. Some people may already have a hobby or pastime they’re passionate about, like golf or gardening, that they will be eagerly looking forward to being able to dedicate more time to. For those that don’t, finding a passion in retirement can help you to stay healthy and engaged with the community.

Travel

Another area high on many retirees list is travel. Especially between partners, its important to get agreement on exactly what this looks like. The difference between caravan trips in the UK or major overseas holidays can have a big impact on how much you need to retire, so you should ensure that both members of a couple are on the same page.

Whether you’re single or in a relationship, you should also think about where travel sits on your priorities list. Would you prefer to travel less and retire earlier, or work longer and have a bigger retirement travel budget? You should also consider the realities of what this looks like. Are you really going to be able to trek in Nepal in your 80s?

Work

Many retirees are viewing their later years in a different way to previous generations. It may be that you want to step back from the pressure of a full-time position but would like to stay engaged with some form of work well into your ‘retirement’ years.

Thankfully, work can take many forms. It could be as simple as cutting back to a day or two a week in your current role. Or perhaps a change of pace working in a low-pressure industry that you have an interest in. Advisory or consultancy positions on boards or committees could be an option for some, or some form of voluntary work.

Armstrong says, “A plan for your time in retirement allows us to create a better financial strategy, because it gives us a clear view on what your money needs to be used for. It’s also important for mental health, as losing the focal point of work can have a bigger impact than many people expect.”

Obviously, funding our own retirement living expenses is the most important objective. However, for some, leaving a legacy is also high on the list. This can mean many different things, such as gifts or an inheritance to loved ones, donations to charity or helping to fund community initiatives.

These preferences will need to be built into your financial plan, to find the best trade-off between leaving this legacy and meeting your own retirement living costs.

According to joint research from the Pensions and Lifetime Savings Association and Loughborough University¹, a couple who own their own home need an annual income of £59,100 for a ‘comfortable’ retirement, while a single person will need £43,100 per year.

But the truth is, those figures mean very little on an individual level. The actual amount you need for a comfortable retirement will vary dramatically based on where you live, what your hobbies are, whether you have long-term medical costs and even the unknown of whether or not you will need care in later life.

Personalised cashflow modelling is one of the few tools available to provide you with a reasonable estimation of how much money you need to retire. A financial planner can create a cashflow forecast for you, considering your ongoing living expenses, lump-sum costs throughout retirement, plans for gifting and a contingency for potential future care costs.

All of this can be built into the plan to show you how affordable your retirement objectives are, based on assumptions on things like inflation and investment returns. They can also run sensitivity analysis on these assumptions, to review the potential impact of things like investment underperformance or higher than expected care costs.

This can help provide guidance on what level of spending is affordable in retirement, as well as inform strategy decisions in creating a plan to drawdown assets in the most tax-effective way.

These questions can be a useful starting point for talking about retirement, but everyone’s conversations will be unique. The most important thing is to talk.

For couples, this means ensuring that they’re on the same page and working towards shared objectives. For people who are single, it means taking a fuzzy, vague picture of retirement and making it a specific, measurable target.

Armstrong says, “The earlier you start talking about retirement, the less drastic your planning measures have to be and the more likely it is that you’ll reach your objectives. If you wait until retirement is just around the corner to create your plan, there are far fewer options for your financial planner to work with.”

Many people manage their pension and other investments without defining their long-term retirement goals. Sadly, this often leads to a lack of coherency could ultimately negatively impact your retirement income.

In order to help combat this, we offer a combined wealth management service. Here, one of our investment managers works collaboratively with a financial planner to create a bespoke and comprehensive retirement strategy. Your financial planner will structure your assets to create your financial plan, while your investment manager builds your bespoke portfolio.

Taking this integrated approach ensures that your investment portfolio aligns with your attitude towards risk, is tax-efficient and complements your retirement plan.

We can help you to see what your ideal retirement and corresponding plan looks like and provide you with a strategy to help make it a reality. 
To arrange a complimentary initial consultation, book a consultation online or call 020 7189 2400.

¹ Retirement Living Standards PLSA - Retirement Living Standards, January 2024