I’ve spent the best part of three decades helping people to plan the financial aspects of their retirement, and then helping people to implement their retirement plans. The three decades have taught me a lot about the financial aspects of retirement, but I’ve also discovered a lot about what makes for a satisfying retirement, from a non-financial perspective.
Whilst a financial retirement plan is important, it’s just as important, if not more important, to have a non-financial plan. It’s amazing how many people go into retirement without spending time thinking about what they want to do once they have stopped work. Neither conventional nor modern financial planning approaches encourage people to think too much about what they actually want to do with the last thirty years of their lives – the former tells you that you will just need a certain percentage (always less than 100%) of your pre-retirement income, whilst the latter assumes that much of your essential and discretionary expenditure will stay the same throughout retirement.
Most people start their retirement as a couple but it’s rare that they form a plan for retirement together. My experience informs me that this lack of planning can be a cause for friction and stress, particularly in the first phase of retirement, when health isn’t a limiting factor.
So, where should you start with your non-financial retirement plan? I’d ask the following questions:
- How are you going to retire? Is retirement going to take place on a single day, or will you gradually wind down over the years? You may have no control over this – in some jobs, you may have no choice but to retire on one day, but if you work for yourself, you may have no choice but to spend some years winding down your business. When do you actually retire if you run a property portfolio?
- What do you want to do with your time when you have (both) stopped work? Vague answers aren’t allowed here; if you’d like to spend time travelling, for example, you need to be specific – where would you like to go, how long for, how do you want to get there, what sort of accommodation do you want to stay in, and how much time do you want to spend at home, not travelling? The same level of specific detail should be applied to other ways of spending your retirement time – hobbies, entertainment etc. It’s very common to find that people have something that they have always wanted to do, but have never had the time to do it (as work kept on getting in the way) – ask yourself what that one thing is, and recognise that retirement is the time when work won’t prevent you from doing it.
- Where do you want your home to be? It may be that you are happy to stay in the same location, but do you want to stay in the same property for your entire retirement? Many retirees would like to make their home in more than one place (Chichester and Malaga, Mrs Wise?), and many will fancy a complete change of scenery.
- How do you plan to replace your work identity? Before we retire, nearly all of us describe ourselves by saying what work we do. It can be difficult to move on from this and I still hear many people describe themselves in terms of what they used to do. I often hear people say “I’m retired” when asked what they do, which is about as much use as saying “I go to work”! Are you comfortable with your post-retirement identity? Many people choose to gradually shed their pre-retirement identity, particularly if their retirement takes place over several years; it’s not unusual to want to pass on the wisdom accrued over the course of a 40 year career in some form or other.
- How do you intend to keep physically and mentally fit? It’s easier to lose both types of fitness in retirement, and much more difficult to get them back. A loss of fitness and health are often the triggers that move you from one phase of retirement to the next (from “Go-Go” to “Slow-Go” to “No-Go”), so it makes sense to work on both aspects of fitness in retirement, even if you haven’t needed to do so previously.
Some people may answer that they don’t want to plan their lives to that level of detail, and that they would like to have the freedom to be spontaneous. It’s important to allow that time for spontaneity, but you still need to know how much time you have for spontaneity – it’s unlikely that neither member of a couple will have something specific they would like to do. Ironically, you may have to plan your time for spontaneity!
Philip Wise | email@example.com
Managing Director and Chartered Financial Planner