PK Patel Head of Wealth Management
28 Sep 2019 4
Leaving work behind you, not for a few hours but for good, can be a powerfully attractive prospect. But a reliable long-term income is essential – especially if you are planning on doing so early. Realistic financial planning is the key, and that in turn is linked to how you intend spending all that free time.
PK Patel, Head of Wealth Management, sees a wide spectrum of customers hoping to retire in their 50s, or even their late 40s.
“There’s usually a life event,” he says, “a trigger for decision such as selling a successful business, or receiving an inheritance or a large bonus, can make people think ‘I don’t want to go on working ‘til my mid-60s’.”
Costing the dream
When considering retirement, grasping hard facts and figures about your assets and the financial products available to you is clearly vital. But there is another equally important and more human dimension.
“When I sit down with customers it is important to get a clear sense of their values as well as their finances: Why do they want to retire at (say) 55 in the first place? What does retirement look like for them – jet skiing in the Caribbean or a little cottage in Pembrokeshire?”
Depending on what you have in mind, there can be very substantial differences in the funds you will need available at different stages of your retirement. Good financial planning should take account of aspirations, as well as money, because the two are of course intrinsically connected.
PK observes that some find their first five to ten years of retirement to be the most expensive because they are using the time to fulfil long-held ambitions. With others, however, the rise in spending comes later because it takes them a while for to gauge the possibilities of their new lifestyle.
And then there are the ‘significant others’: What does your spouse think? Will he or she go on working? Are you planning on giving money to your children, perhaps a deposit for a house, and do you want to make some extra provision for your grandchildren?
PK has found that many early retirees end up returning to work, especially as life expectancies increase. Indeed, the Office of National Statistics has estimated average life expectancies at aged 65 as extending into the mid-80s for both men and women[1].
“People are concerned about keeping their minds sharp. Many early retirees are experienced in business and have an eye to starting a new enterprise. If this is the case, it is important to allocate funds for that eventuality. Others want to help good causes, in which case it is similarly important to set some assets aside for that.”
Planning to accumulate
Of course your options will, in large part, be determined by how much you’ve built up.
The age of retirement makes a big difference; the further off it is, the easier it becomes to fund. So the earlier you know how much to set aside for pensions, savings, or investments such as shares or property, the better. If you start planning at 45 – and some people do – then the focus is often still on accumulation. By the time you are 55, the focus has shifted to what income can actually be drawn on during retirement, especially if you are retiring early.
For those intending to retire early, considering other assets, such as buy-to-let properties or cash deposits in the accumulation stage, can be especially important. Your pension only starts to become accessible from aged 55 onwards through secured annuity income or through unsecured means, such as flexi-access income drawdown. And of course there are a variety of saving and investment options.
When it comes to investing, much depends on a person’s appetite for risk, and their capacity for loss should an investment not perform as expected. “Bonds, shares, commercial property need at least 7-10 years to be worth considering. Begin planning 10-15 years in advance and you can consider investment options with slightly higher risks,” says PK.
A continuing conversation
Regular advice and monitoring of your retirement plan is important in order to make the most of opportunities, minimise risks, and respond to the constant possibility of changes in the legislative framework. It can be a good idea to continue seeking regular advice even after you leave work and have embarked on your retirement journey.
“You’d be surprised by the challenges which can arise,” PK explains. “Some people may want to release high levels of income; others may want less. Retirement breeds new perspectives on what people can do with their lives and the financial plan should always be reviewed."
“Reviewing your plan regularly, at least every 12 months or so, keeps the conversation going to ensure that retirement, at whatever age, and however you choose to do it, is a continued success.”
[1]www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies
/bulletins/nationallifetablesunitedkingdom/20132015#life-expectancy-at-older-ages
Important Information
Handelsbanken Wealth & Asset Management Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the conduct of investment and protection business, and is a wholly-owned subsidiary of Handelsbanken plc. For further information on our investment services go to wealthandasset.handelsbanken.co.uk/important-information. Tax advice which does not contain any investment element is not regulated by the FCA. Professional advice should be taken before any course of action is pursued.
- Find out more about our services by contacting us on 01892 701803 or exploring the rest of our website: wealthandasset.handelsbanken.co.uk
- Read about how our investment services are regulated, and other important information: wealthandasset.handelsbanken.co.uk/important-information
- Learn more about wealth and investment concepts in our Learning Zone: wealthandasset.handelsbanken.co.uk/learning-zone/
- Understand more about the language and terminology used in the financial services industry and our own publications through our Glossary of Terms: wealthandasset.handelsbanken.co.uk/glossary-of-terms/
All commentary and data is valid, to the best of our knowledge, at the time of publication. This document is not intended to be a definitive analysis of financial or other markets and does not constitute any recommendation to buy, sell or otherwise trade in any of the investments mentioned. The value of any investment and income from it is not guaranteed and can fall as well as rise, so your capital is at risk.
We manage our investment strategies in accordance with pre-defined risk objectives, which vary depending on the strategy’s risk profile.
Portfolios may include individual investments in structured products, foreign currencies and funds (including funds not regulated by the FCA) which may individually have a relatively high risk profile. The portfolios may specifically include hedge funds, property funds, private equity funds and other funds which may have limited liquidity. Changes in exchange rates between currencies can cause investments of income to go down or up.
Registered Head Office: No.1 Kingsway, London WC2B 6AN. Registered in England No: 4132340