Monthly Archives: February 2019

How to Phase into Retirement and Take It for a Test Drive

There are many reasons why people who could retire are hesitant to do so. Some people think they need to wait until they’re 65 or older. Some are worried about running out of money. Many parents want to keep supporting their children through some major life transition, like university, marriage, or buying a first home.

Maybe the most common reason we see for a retirement delay is people who just can’t imagine their lives without work. That’s understandable. A routine that’s sustained you and your family for 30 or 40 years can be a hard routine to shake.

But retirement doesn’t have to be all or nothing right away. If just thinking about retiring makes you jittery, use these tips to ease into retirement a little at a time.

  1. Talk to your family

Clear, open communication is an essential first step to approaching retirement. Be as honest as possible about what you’re feeling. What worries you about retirement? What excites you? What do you envision your days being like? Where do you want to live? What does your spouse want retirement life to be like?

  1. Talk to your employer

Many companies have established programs to help employees transition into retirement. You might be able to trim back your hours gradually to get an idea of what days without working will be like. You’re also going to want to double-check how any retirement benefits you may have are going to work. Discuss any large outstanding projects with your supervisor. Make a plan to finish what’s important to you so that you can leave your job feeling accomplished.

Self-employed? Give your favourite employee (you) less hours and fewer clients! Update your succession plan and start giving the soon-to-be CEO more of your responsibilities. Make sure you have the absolute best people working for you in key leadership positions so that your company can keep prospering without your daily involvement.

  1. Make a “rough draft” of your retirement schedule 

What are you passionate about? What are some hobbies you’d like to develop into a skilled craft? Do you want to get serious about working the kinks out of your golf swing? Are there household projects, repairs, or upgrades you want to tend to? A crazy idea you kicked around at work you’d like to build into a new company? A part-time job or volunteer position you’d like to take at an organisation that’s important to you? New things you want to try? New places you want to visit? Grandkids you want to see more often?

Try filling out a calendar with some of your answers to these questions. As you start to scale back your work hours, take a few lessons take on some voluntary work. Sign up for a class. Go away for a long weekend. See what appeals to you and what doesn’t.

Remember, you don’t have to get your schedule right the first time! A successful retirement will involve some trial and error. Learn from things you don’t like and make a point to spend more time doing the things you do like.

  1. Review your finances.

This is where we come in!

Once you and your spouse have settled on a shared vision for retirement, we can help you create a financial plan to help ensure you are financially fit for (semi)-retirement. We’ll go through all your sources of income, pensions, savings, and other investments to set out a projection of where your money is coming from and where it’s going.

We can coordinate all aspects of your situation and collaborate with you on the best course of action. You don’t have to face retirement alone and make big decisions without expert guidance.

Coming in and talking to us about your retirement is a great “Step 1” option as well. So, if you are dreaming of those days when work is optional, give us a call and we can help you through this phase of life.

Managing Time

As a family we enjoy holidaying in Spain, and I am always struck by the difference in perspectives on how we live in the UK and how the Spanish live. The fact that that most Spanish shops close between 2p.m. and 5 p.m. so that people can have lunch and recharge, rather than staying open and making money is very much different to our own culture.

The towns and cities slowly come to life as couples, families and friends emerge onto the streets for their evening paseo; the daily ritual of catching up by taking a stroll, having some snacks or perhaps doing a little shopping. These routines appear to make little sense amid the bustle of our modern world, but it is nonetheless an interesting lens from which to view how we help clients live their best lives.

Allocating time is as important as allocating money.  Besides money, time is another major limited resource in life, yet very few of us approach managing this aspect of our lives using the same discipline with which we manage our money.

As financial advisers we take great pride in helping clients allocate their investments as efficiently as possible but, imagine if we helped people think about how their money could get them to use their time better.

There’s scientific evidence that using money to give people more time can make them happier too. In August 2017, researchers at Harvard published a paper after studying the spending habits of more than 6,000 people in the US, Canada, Denmark and the Netherlands.[1]

They found that: “Despite rising incomes, people around the world are feeling increasingly pressed for time, undermining well-being. We show that the time famine of modern life can be reduced by using money to buy time. Surveys of large, diverse samples from four countries reveal that spending money on time-saving services is linked to greater life satisfaction. To establish causality, we show that working adults report greater happiness after spending money on a time-saving purchase than on a material purchase. This research reveals a previously unexamined route from wealth to well-being: spending money to buy free time.”

None of us dispute that one of the cornerstones to living richly is spending our limited time on the things we really care about. However, many of our discussions with clients focus on the wrong goals. So, what can we do about it?

  1. Helping people prudently spend is as valuable as helping them prudently save. Of course, as advisors we are rightly focused on ensuring that people don’t run out of money. However, there is usually a trade-off between time and money. Focusing too much on building the biggest nest egg possible sets the wrong goal for clients. Every pound saved might build more security, but it just as surely takes away from their life today. More money does nothing to improve your life if you don’t use it to improve your life along the way. Preventing clients from over-sacrificing today is as much a part of a great planner’s job as ensuring a financial plan works in the future.
  2. Priorities exist today that are as important as those in the future. Planners spend most of their time with working clients discussing their future and retirement, yet clients worry the most about prioritising all the trade-offs they have today. They want to be there for their families, find time and money for holidays, or make time in their schedules to exercise. We can help people make decisions to improve their lives immediately.   Rather than focusing solely on the longer term and sacrificing as much as possible for the future, it is important not to lose the opportunity to make trade-offs and add immediate value to people’s lives today.
  3. Discussing what really matters engages everybody. The biggest cost to our industry on spending so much time on maths and money is that it disengages the non-financial person.  Where we work with couples, that can often mean that one spouse is not involved in something that they should be making an integral part of their financial lives. By discussing time and how the money will support each person’s priorities, you connect to the universal truths we all care about.

Money might not grow on trees, but time doesn’t grow at all. One of the consequences of having a country that encourages siestas and two-hour lunches is that Spain is one of the least financially successful economies in Europe. Yet you can’t help but notice that their focus on living and enjoying their time, instead of working and making more money, has a meaningful impact on the quality of their lives.

For each of us and our clients, the balance lies somewhere in between. Our job is to help our clients live at their ideal place on that spectrum of trade-offs.

[1] https://www.pnas.org/content/114/32/8523

 

With Compliments to Marie Kondo …

This blog is based on one that I read recently from a US blog site Sightings Over 60 which is always an interesting read.

The Netflix show “Tidying Up with Marie Kondo” has become a phenomenon. Kondo has been around for a while. Her book The Life Changing Magic of Tidying Up was released in 2014 and climbed the bestseller lists. She followed that book with Spark Joy, which tells us, according to the New York Times, that “you can own as much or as little as you like, as long as every possession brings you true joy.”

To be honest, I have not read her books, nor have I seen her show, but having had the opportunity to declutter when moving to a new house, one thing I do know is that decluttering is not a one-time event; it’s an ongoing process.

If you are retired and the kids have left home it is highly likely that you no longer need all that stuff filling up the garage, loft and wardrobes.  Yet decluttering can be a big job with one rule of thumb suggesting that you allow an eight-hour day of decluttering for each year you’ve lived in your house!  But unless you want a bad back and sore knees, you probably shouldn’t try to do it all at once.

So, here are some steps you can take to declutter … with a nod to Marie Kondo for making cleaning up cool.

  1. Warn your children. If the children have left home, invite them to look through your house and take what they want. Then insist that they remove any and all of their own materials – the boxes of old school items, the stuffed animals, trophies from sports tournaments, souvenirs from holidays, etc..
  2. Have a heart-to-heart with your spouse. Most relationships, it seems, consist of one hoarder and one simplifier. To avoid working at cross purposes, you need to sit down and talk things through – so one person isn’t throwing something away while the other is retrieving things out of the bin. The hoarder must realise that many things — VHS tapes, a record player, old sports equipment — are outdated or can be easily replaced. The simplifier must admit that some things have sentimental value and can’t be replaced. So, let’s not be like the dysfunctional politicians. We need to realise that there can be emotional issues involved in the process … and be ready to compromise
  3. Sort one space at a time. It’s easy to get bogged down if you do a little of this, and a little of that. So start small. Clean out a wardrobe, then a bathroom, then one of the kid’s bedrooms. The hardest jobs will be your own bedroom, the loft, and the kitchen.
  4. Touch something once; make a decision. As you go through your old clothes, old books, or old furniture, for each item decide whether you need to keep it or get rid of it. The key to making progress is to make the decision. If you need one suit, then decide which one to keep and get rid of the others. Try not to hmm and ah, change your mind, or postpone the decision – or that one day per year could turn out to be two or three days per year. Or, the decluttering may never get done.
  5. Make five piles. Keep. Sell. Gift. Recycle. Bin. Decide what you want to keep and put that in one pile. The rest goes into one of the other four piles. But try to decide right away – you can give it to someone; you can sell it, recycle it or throw it away. But don’t waste too much time deciding – just choose a pile. If you make a “mistake” and throw away something that maybe you could sell or give to charity – be realistic, you probably wouldn’t have sold it for much money anyway, and the charity wouldn’t have either.
  6. Take pictures. The hardest decision are the emotional ones. But if you can’t bear to get rid of something you need to get rid of, then take a picture. The special dress? Put it on, take a picture, then give it away. The shelf of trophies, the wonderful old oriental rug that will never fit into your new place – take a picture and keep it with you always.  Then make sure to send copies of those photos to your kids.
  7. Books. Marie Kondo has caught some flak for suggesting we keep no more than 30 books in our homes. My own opinion is that books are like albums and CDs, or tapes and DVDs. Keep them around, if they bring you “joy.” But it’s not the books themselves that are important. It’s what’s inside — the information, the characters, the stories and those are all readily available from the library or the internet.
  8. Hire a professional. For most people, decluttering is a do-it-yourself project – and they would have it no other way – perhaps with some help from kids or a best friend. But sometimes the job might just be too big; or you’re too overwhelmed by the prospect. There are professionals who will help you.

So, here’s to many ‘happy hours’ decluttering … or at least planning to.

Markets fell in 2018 – but keep this in perspective

This latest blog is brought to you by our Investment Consultant – Tim Hale of Albion Consulting.

2018 may have been a disappointing year for equities, but this shouldn’t have been a surprise.

December 2018 dished up a rather distasteful present for the holiday period.  Many lines were written in the broadsheets about the global equity market falls, but were they really anything out of the ordinary?

‘Stock market slide in 2018 leaves investors bruised and wary’ The Financial Times’ (31st December 2018)

Since 2009 (the bottom of the market during the Credit Crisis) global markets have delivered positive returns in eight out of the ten calendar years. The last negative year for equities was back in 2011, when the markets were down around 7%. Over the history we have available to us – on average – one in three years deliver negative returns. Investors have, of late, been extremely lucky.
Since 2008, in every single year, investors have suffered a fall from a previous market high and many of these falls were larger than 10%. However, even investing at the start of 2008 and suffering the 35% peak-to-trough fall in 2008, an equity investor would have turned £100 into £230, i.e. 8% compounded over 11 years, if they had been disciplined and patient (two known areas of human weakness!).

As humans, we tend to have a strange view of what invested wealth represents and how we feel about it at any point in time. We tend to be happy as wealth – at least on paper – goes up to some value at a specific point in time and unhappy when we reach that value again, if it is achieved after a market correction.

Remember, the true meaning of wealth is having the appropriate level of assets that you require, when you require them, to meet your financial and lifestyle goals. In the interim, movements in value are noise, somewhat meaningless and part and parcel of investing. When you invest in equities, you should try to avoid mentally banking the money you (appear to) make on the undulating, and sometimes precipitous, road you are on. Remember too that the headline equity market numbers are unlikely to be your portfolio outcome, as most investors own some sort of a balance between bonds and equities.

Keeping things in perspective

Investing in equities is always going to be a game of two steps forward and one step back. What equities deliver from one year to another is of little consequence to the long-term investor, who does not need all of their money back today.

As far as 2019 is concerned, no one who is honest knows what will happen in the markets. The global economy is still set to grow by 3.5% above inflation this year, according to the IMF, which is not that bad. Today market prices reflect the aggregate view of all investors based on the information to hand. If new information comes out tomorrow, prices will adjust to reflect the impact this has on company valuations. As the release of new information is – by definition – random, so too must price movements be random, at least in the short-term. Over the longer-term they reflect the real growth in earnings that companies deliver through their hard work, executing the delivery of their business strategies. In the longer-term, investing in the stock market is a game worth playing, at least with part of your portfolio.

As Benjamin Graham – a legendary investor in the early 20th Century once said:

“In the short run, the market is a voting machine but in the long run it is a weighing machine”
We could not agree more.

notes and risk warnings

This article is distributed for educational purposes only and must not be considered to be investment advice or an offer of any security for sale. The reference to any products is made only to make educational points and must, in no circumstances, be deemed to be any form of product recommendation.

This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
Errors and omissions excepted.