Many years ago, I was at a wedding. In his speech the father of the bride said how his daughter was a rebellious difficult teen when she left home for university. Three years later when she returned home, she remarked how much her parents had matured while she was away.
Recently I was speaking to a lady about how retirement changes you. She said that it took three years for her husband to learn to retire. This set my mind thinking, I stopped being in full-time employment five years ago – have I retired or am I still learning how to?
My situation is unusual, but then again, many my age might say the same thing. Dare I ask my wife where I am on the learning curve? Not on the day when leaving for work she asked me to do a couple of things and, on her return, she is met with, “Other things got in the way.”
Recently I was going through the discussion document issued by The Pension Regulator entitled, ‘Pensions for the future’. The reason people have pensions is to finance their retirement. What is surprising is how little there is in the document about retirement and what pensions need to deliver to contribute to that retirement.
Throughout your life, part of the definition of what you are and your role in society is determined by what you do. You are a student, you are unemployed, you are a taxi driver, you are bricklayer, you are a hairdresser, you are an accountant, solicitor or dare I say it, a financial adviser.
When you retire, you become one of the unemployed. We may refer to ourselves as a retired accountant and so forth, but if we are not practising accountancy, we are unemployed. For some this is the first harsh reality of retirement.
For those of working age, one of the problems of becoming unemployed is keeping to a routine; if you do not have to get up in the morning to go to work, what is the incentive? For the unemployed, usually, there is the need to find work. That incentive does not usually exist for the retired.
Will they watch television all day? Will they regularly play golf, tennis and go on cruise holidays? Which stereotypes do you see for yourself in retirement? Probably none of them.
Now what constraints will they face in retirement? There is much talk that due to the economic effect of the pandemic many need now to change their retirement plans so they will not retire until they reach age 70 or later.
However, that presupposes they can find work until then, that they remain healthy enough to continue to work until then, and that the health of their family does not place constraints on those plans. Also, their own health and that of their families could constrain the retirement they experience.
Many dream retirements will not be viable without sufficient income. Do they know what they will spend in retirement? They should receive a State pension, but how much more do they require? As a rule of thumb, they should aim for a retirement fund of 25 times that required income.
To provide an income of £10,000 a year in addition to their state pensions, requires a retirement fund of £250,000. How many will have access to such an amount?
Insufficient funds to provide the required retirement income means something will have to give or other wealth will need to be considered. This is where housing wealth may have to be utilised.
People who are learning often need a coach or a mentor. The qualifications for a coach or mentor are usually that they have experience in what their pupil is learning. But how many financial advisers have retired? If they had they would not be financial advisers. Often, they will be 20 years or more younger than their client. That is why it is important for later life retirement planners to continually place themselves in the shoes of their clients.
Who will they be in retirement? What do they want to do in their retirement? What non-financial constraints will affect their retirement? Some may be known; others may require acceptance that contingencies may have to be put in place?
Only then can the financing of retirement be discussed, and the client begin to learn how to retire.
Bob Champion is chairman of the Air Later Life Academy