There’s a pretty good chance that your parents or grandparents retired simply because they reached age 60 or 65. However, today’s retirement is a bit more complicated than that and I’m not just talking about the changes that have been made to state pension age.
Whilst age is still an important factor, your ability to connect your financial resources to your lifestyle goals is what will truly determine if you’re ready to retire. Here are three important markers to cross before you crack open your nest egg:
1. You’re financially ready.
The most common question we field from our clients is, “How much do I need to retire?” While there’s no magic number to hit, a few key checkpoints are:
– You have a budget. Many clients who are preparing to retire tell us they’ve never kept a budget before. Time to start! If you have any big plans for early in your retirement, like remodelling your home or a dream holiday, let us know so we can discuss and model this expenditure to ensure it can be achieved.
– Your debts are paid. No, you don’t necessarily need to pay off a fixed-rate mortgage before you retire. But try to reduce or eliminate credit card balances and any other loans that are charging you interest.
– Your age, pension funds, and state pension benefits are in sync. If you’re planning on retiring early, be sure that your pension provider won’t charge you any early withdrawal penalties for which you’re not prepared. Ensure you have maximised National Insurance to provide a full state pension entitlement.
2. You’re emotionally ready.
We spend so much of our lives working that our jobs become a large part of our identities. Rediscovering who we are once we stop working can be a major retirement challenge. To prepare for this emotional transition:
– Talk to your spouse ahead of time. Don’t wait until your last day of work to discuss how both of you feel about retirement. What do each of you imagine life will be like? What are the things you’re excited to do? What are you afraid of? What can each of you do to make this new phase of life as fulfilling as possible?
– Make a list. What are the things you’re passionate about? Something you’ve always wished you knew more about? A skill you’d like to develop? A cause that’s important to you? A great business idea that was too ambitious for your former employer?
– Check that your estate planning is up to date. It’s understandable that many people avoid this part of their retirement planning. But putting together a legacy that could impact your family and community for generations can have tremendous emotional benefits. The peace of mind that comes from knowing the people you care about are taken care of can empower you to worry a little less and enjoy your retirement more.
3. You’re ready to do new things.
Ideally, the financial piece of this conversation should make you feel free enough to create a new retirement schedule based on the emotional piece. Plan your days around the people and passions that get you out of bed in the morning. Some ideas:
– Work at something you love. Take a part-time job at a company that interests you. Turn that crazy idea you couldn’t sell to your old boss into your own business. Consult. Teach. Volunteer.
– Keep learning. Brush up your school French by enrolling in an online course. Learn some basic web design so you can showcase your photography portfolio or sign up for cooking classes and get some new meals in your weekly rotation.
– Get better at having fun. What’s the best way to lower your handicap or perfect your backhand? Take lessons from a pro. The second best? Organize weekly games with friends and family.
– Travel. Planning out a big holiday can be a fun project for couples to do to together. And while you’re looking forward to that dream trip, take a few weekend jaunts out of town. Stay at the new hotel you keep hearing about. Visit your grandkids. Go on the road with a favourite sports team and enjoy the local flavour in a different city.
If you’re nearing retirement and struggling with these issues, working with us might provide some clarity. Why not give us a call to discuss how we can help get you ready for the best retirement possible with the money you have?
Warning – The information noted above is for general information only and is not intended as personal advice. Carpenter Rees does not accept any liability for your reliance upon, or any errors or omissions.