The majority of us work, or at least expect to work, until we turn 60 or 65. But is this what we really want? At the risk of being too morbid about things, when you consider the average life expectancy in the UK is 81, that gives us only 15 years to enjoy retirement.
Just because it’s the norm to retire at 65 doesn’t mean you should wait until then; and just because you started paying into a pension at 18, doesn’t mean you should leave it sitting where it is. A well-managed pension pot can help you to achieve your goals, whether that’s early retirement, a new car, or the holiday you’ve always dreamed about.
Because of a change in pension rules, flexible payments from pension pots have reached a record high. Between 2016 and the end of 2017, the number of people choosing to withdraw lump sums increased by 50 per cent. However, there are concerns people are withdrawing lump sums without proper advice or understanding of the consequences.
It’s always best not to rush these decisions and to make sure you are doing it for the right reasons.
Our advice to clients is to firstly think about what they’d like to achieve. Is it early retirement, a holiday every year or saving to provide your children or grandchildren with a financial advantage? Once you have these goals in mind, think carefully about your assets and how they can help achieve these goals.
It should be remembered that a pension is also an asset and can be used to fit your lifestyle.
Bob’s story: Sleepwalking into retirement
Bob* came to us with a fairly standard final pensions salary arrangement. It provided him with £2,500 income after tax to fund his lifestyle in retirement, but he would need to work until 60 to achieve this.
As a standard arrangement, Bob had accepted that he would do his time at his firm and in his words, “sleepwalk into retirement”. Chatting through his goals for retirement, it became clear that Bob wasn’t enjoying his job and had one regret in life – not following his passion to study art. He thought he’d left it too late to start.
Using cash flow forecasting, we showed Bob he could retire five years earlier than planned, and could afford to go to art school. Bob retired almost immediately and headed straight to art school at the beginning of the next term. It might have taken 35 years to get there, but Bob is finally indulging his passion, something he didn’t think possible.**
Sometimes we don’t fully understand the value of the assets we hold and what they can achieve when they’re working well for us. By clearly understanding your goals and mapping out your assets, you can quickly draw a realistic picture of what’s achievable in retirement, which might be more than you think.
We can help you to live the life you want, not the life you think you can afford. It’s simpler than you think. Contact us to find out how.
*Clearly, Bob is not his real name. We’ve changed it to protect “Bob’s” privacy.
** What worked for Bob might not work for you
Strathclyde Sirens and Murphy Wealth team up to look after your financial health
We are working with Strathclyde Sirens, Scotland’s only semi-professional netball team, to create toolkits and share valuable advice in order to help the population look after their financial health during this uncertain time.