A lot of people take a greater interest in their financial plans once they have stopped work. It’s natural to want to do so; after all, you used to pay the bills by working and now your retirement resources have taken on the role of bill payer, so it seems sensible to take a greater interest in what is happening to your retirement investments and assets. And, of course, you have more time on your hands.
We think that it’s important for you to decide which roles you should take on in the retirement income planning process.
There are some areas where it makes a lot of sense for you to take a greater involvement:
- Planning withdrawals. You should spend time thinking about what you are going to spend your money on and when you will spend this money. The earlier you plan for withdrawals, the better. This is particularly critical during the early retirement phase – the “Go:Go” years, when your discretionary spending will, hopefully, be at its highest.
- Squeezing the most out of the money you spend. Make sure that you are spending your money effectively, getting good deals on your utilities, avoiding spending money unnecessarily and making your money go as far as possible. If you were in a PAYE role before you were retired, you were probably paid monthly, and it made a lot of sense to pay bills monthly. But, if you are now relying on a retirement fund to pay the bills, you can change the frequency with which you pay your bills. It can be cheaper to pay annually in advance and now that you have control over when you make your withdrawals, you can take advantage of this flexibility.
- Monitoring your expenditure. Keep a note of what you are spending your money on, and provide that information to your planner. This might also help you to get the most of your spending too.
Conversely, there are some areas where you should try to resist the temptation to increase your involvement:
- Asset allocation. Your input is needed into the process – after all, we need to know what you want to spend your money on, and you need to tell us about your risk personality. However, it’s unlikely that you will be able to interpret your own risk personality, or act as a critical friend to yourself.
- Picking investments (stock selection). It’s best to let your financial planner make these choices for you. Your role is to decide whether the financial planner is right for you; are they making the best choices they can, based on your interests, rather than their own?
Our view is that you should kick back and enjoy your retirement – financial planning is a full time job!
Philip Wise | email@example.com
Managing Director and Chartered Financial Planner