Later Life Planning
Plan to Relax. When planning for your retirement it is simple to think of one unbroken style of living. However, this is rarely the case.
Retirement in three stages
Usually, retirement comes in three parts. The first, early retirement, consists of an active lifestyle, travel costs, higher spending. Middle retirement starts to simplify. Home downsizing, fewer activities and less travelling is needed as we start to age.
Late retirement has very different needs and often unexpected high costs such as health care or in-home support fees. Retirement homes can be very expensive and are often not taken into account in traditional planning.
Goals give freedom
If you can set clear goals early about your retirement with your adviser, the planning we can put into place can be extremely effective For example, clear goals about annual income, holiday costs and choosing to factor in the potential cost of later life care home fees allows you to ascertain with certainty which money is for enjoying now and which is preserved for the future.
Without these clear goals, it is easy to drift into debt later in life, or to allocate money into inaccessible products.
The three principles of later life planning
Principle 1
Retirement comes in three stages. Early retirement, middle retirement and late retirement all have different needs and different planning.
Principle 2
Well set goals allow for a well planned future. No goals means poor planning, and an uncertain future.
Principle 3
The closer the future is to now, the more predictable it becomes.
How can I plan so far ahead?
There is a truism in planning; ‘The next decade is difficult to predict, but tomorrow is almost certain’.
We use a process called Monte Carlo prediction which allows us to predict well into the future with reasonable certainty but with excellent certainty on the next 3 years. With each year that passes, we refine the model and increase the accuracy of the following years. This allows us to create greater and greater certainty into retirement and old age.
Money can only be spent once. Equally, you shouldn’t over-save for a rainy day that might not come. We use a three pot system of retirement funding which allows an enjoyable present while preserving funds for the future.
The first pot is your next three years of income and spending, in a liquid and accessible product. The second pot is your mid-term savings, to continue to fund growth and supply income as time progresses. The final pot is your long term monies to protect against unexpected future needs.
Past performance is not a guide to, nor does it guarantee, future performance. You should be aware that the value of an investment can fall as well as rise and that investors may not get back the amount they invested.
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