Approaching the day of retirement seems to be a double-edged sword for many of our clients. The excitement of not having to work and the thought of spending more leisure time travelling, ticking off a bucket list, winding down and spending time with partners and family is offset with a tangible fear of having enough money and more importantly making it last. Recent Pension Freedoms legislation allows for complete control over a pension pot but this comes with a health warning – take too much out and it could be exhausted.
A common concern is the accumulation/decumulation conundrum with the following comments heard very regularly – “my working life has lasted over 40 years, throughout which I have saved for the day I retire (be it through building a business and selling it, property, a pension or other investments). I have not needed this money so can see it grow in value – the accumulation period. Now approaching retirement with no more earned income, my expenditure must come from my assets and many feel uncomfortable they will deplete” – the decumulation period
How can you overcome this fear slowly built up over your career with the very sudden realization of a significant sea change in how you view and manage your money. Responses are varied – from the wreckless “sod it I intend to do what I want to do and I don’t know when it all ends and if I run out I will deal with the problem then” at one extreme, to the other extreme – the very cautious “ I don’t want to be broke so I will watch every penny, forgoing many plans for my retirement so I can leave something to the kids, make sure I will always have more than enough”
Neither are pragmatic, sensible options. The first step is to overcome this fear, adopt the very practical and healthy approach that money facilitates lifestyle, your enjoyment of life and ultimately longevity, surely people live longer if they are happy, challenged, interested and fulfilled.
Create a cashflow projection, consider expenditure outcomes and budget accordingly, don’t ignore investment growth on assets, consider other methods of creating income if expenditure does result in asset exhaustion, don’t forget to include state pension. Or find someone who can help you with this.