So, you’ve retired! Congratulations! How do you feel about it? Many people feel liberated, unshackled from the bonds of work and time pressure. It can be a truly wonderful feeling. For others, however, there are stresses, as there were before retirement. Life seems to have a habit of not leaving us in peace, regardless of what stage of life we’re in.
We’d like to share with you some of the issues we see and how we help people address them.
Is Your Money in the Bank Helping or Hurting You?
There are plenty of good reasons why people keep money in the bank.
Having money that you can get your hands on quickly and easily is an excellent plan. You never know when life will throw bad news at you when you don’t expect it. You need to know you’ve got an emergency fund you can fall back on, especially in retirement.
You might be taking an income from a drawdown arrangement or other investments. If you are, there might be some merit in having enough income for a year (or perhaps more) in the bank so you reduce the chance of taking income from your invested funds when investment markets take a tumble.
Something Exciting on the Horizon?
You may have a special holiday or other event planned for the relatively near future. You might be changing the car, getting that extension done or paying for a wedding.
It could be anything but, if you know it’s coming soon, it might be sensible to have the money for it squirrelled away separately, probably in the bank. You may be reluctant to access the money at a time when investments markets aren’t so good.
But Here’s the Problem…
All these reasons make having money in the bank very sensible. The problem is, we see many retired clients with much larger sums in the bank than they’re likely to need. We totally understand the phycological security this provides but, if inflation is higher than the interest being earned, in the long run it could be very damaging for your money. Think about how much you need and consider what we’ve said…
How’s Your Spending?
It’s often hard to predict how much you’re likely to spend in retirement. You can complete all the budget planners in the world but you’ll never know for sure until you get there. People are humans and, as such, can be prone to over-estimating how much their retirement will cost (or the other way around).
If, like many, you’re spending more than you thought, it might be time to sit down and plan things a little. It could be that you need help to make some savings or it could be that you need to take a higher income (if that’s possible).
Knowing where to take the income from and what the long-term impact could be is scary for many but it’s possible to bring clarity and calm to the position.
How’s the Taxman?
Are your retirement savings as tax-efficient as they could be? There are several things you might be able to do to reduce the tax you pay which could include making the most of your ISA allowances or taking advantage of any unused personal allowances. (your personal allowance is the amount you can ‘earn’ before you pay tax).
The list goes on and this we don’t want to get too technical but there could be things you could do that would make a difference to the amount of tax you pay.
Hopefully, we’ve raised some issues that might be on your mind and have given you some possible ‘wins’. As we’ve said, everyone’s unique and your particular circumstances will dictate which course of action is right for you. The points we’ve made shouldn’t be taken as financial advice but are possibly useful pointers.
Plan and plan regularly, we recommend at least once a year. Sound financial planning is the antidote to falling investment markets, changes to tax rules, your daughter deciding she wants to get married!
Financial planning will help you see what the future might look like and this is where we add the most value to our clients. Being with them through the ups and downs of their lives (and the investment markets) and making sure their retirement finances are as stress-free as possible.
These days, retirement is not just an event… it’s a process that often needs constant adjustment…