The trend towards active retirements and generally longer, healthier lives means that good financial planning is required to meet your desired retirement goals. However, since the coronavirus outbreak some of our clients have asked us ‘can I afford to retire early or indeed can I still afford to retire?’
COVID-19 has left many reassessing their work-life balance and for those who are heading towards retirement age some are asking themselves is it worth carrying on working? Can they afford to retire early rather than looking for more work in their late fifties? Is it worth the stress of carrying on during the turbulence of lockdowns and restricted trade? By working with clients to plan ahead and using tools that help calculate how much income you might need in different scenarios, Ascot Lloyd can show clients the options they have and map out what they need to help them achieve their goals.
What has happened to my pension pot in 2020?
We all saw the drop in the markets in March and knock on effect of investment values, Aaron White, Ascot Lloyd Independence Financial Adviser comments ‘Despite the drop we saw in Q1 my clients have seen their pension fund performance increase in the last six-months with the average pot recovering much of the ground lost at the start of the year when COVID-19 first hit financial markets.’
It is important to remember that this is a long-term plan and a robust financial plan will have already moved your investments to suit your current and future needs.
A detailed picture of your financial future
Ascot Lloyd Independent Financial Adviser, Aaron White, uses cashflow modelling to give his clients a detailed picture of their financial future taking into consideration their assets and liabilities, along with income and expenditure. This projects year by year to aged 99, or beyond if you like, to show clients how their income and expenses balance out for the rest of their lives.
Aaron shares how one of his client couples have been reassessing working life and their affordability to retire. In their late 50’s, having worked hard throughout their lives in the events industry, the pandemic hit them particularly hard with all events being cancelled and little outlook for recovery. Also, like many, during the pandemic they took stock of how valuable life is. They observed friends who had recently retired; sadly, one passed away early and another wasn’t making the most of life as they could. This prompted them to want to retire early, whilst they are fit and healthy so they can do new things, visit new places and spend more time with grandchildren.
For this client, like many, COVID-19 has dried up employment income, but hopefully some contracting work in 2021 could mean they can afford to semi-retire for a couple of years and confidently know that they will have enough money to see them through to later life whilst maintaining their desired standard of living.
Preparing for the lifestyle you want in retirement
Retirement planning involves creating a clear picture of your retirement goals, then charting a course that will help you achieve those goals through financial planning.
With average life expectancies increasing, your pension pot may well have to cover two or three decades of expenses and as you move through retirement, your priorities and your expenditure will change.
For example, it is likely you will spend more on leisure in the earlier retirement years and this spending may well reduce as you get older. On the other hand, you may find you spend more on utility bills and insurance, or you may have to fund your own care in later life.
At Ascot Lloyd, we work with clients to model various future scenarios, which provides much needed clarity and confidence for retirement planning.
Are you looking for some help?
If you would like to find out more about any of the areas outlined above or are interested in receiving some advice, please don’t hesitate to contact your financial adviser.