Trends changing retirement planning forever!
COVID-19 disruption…a disruption that will change the way we live forever. It’s affected everything we do.
From how we work, educate our kids and retirement planning to name a few.
We were seeing these trends pick up pace before COVID-19 changed life the way we knew it. Forcing us into isolation. Forcing us to change the way we live our lives.
These trends now forcing our hands.
When this ends. A time when we can again enjoy the simple things in life, once again. Like going to a restaurant.
It will feel a kid in a lolly shop. Dosed up on something we’ve missed for so long.
So what does retirement mean?
The dictionary meaning, “the action or fact of leaving’s one work and ceasing to work”.
Working with clients navigating retirement for two decades. When you boil it down, most are yearning for more time freedom.
While some choose to still work, whether full time or reduced hours. They feel they have more to give, it’s more of a hobby than a job.
For others, it’s a decision out of their control.
But, what does retirement mean for you?
No doubt the extra time you’ve had during isolation has changed your view of what’s important to you. For most, their focus has moved to experiences rather than things.
Retirement planning is not immune from these trends. Trends that will accelerate as a consequence of the COVID-19 disruption.
You too may have been considering what’s important to you!
Trends Changing Retirement Planning Forever:
#1 Retirement Is Not A Number.
For so long retirement planning has been about one thing, your magic number. How much do you need?
The focus is moving to how you can continue to live your best life. While the numbers are important, it’ll become more about life outcomes and less about your investments.
It’ll be, how do you use the money you have as a utility to live your best life.
Increasingly, people are becoming more lifestyle focused. Just because you retire doesn’t mean you stop living life.
We know your retirement years will be longer than your parents. We know, for most you’ll be healthier and more active for longer. No longer is 65 the time to retire from the workforce and see out the rest of your life out on a park bench.
It’s about the outcomes that are right for you.
#2 Value Experiences Over Material Things.
If we can take anything positive from the lockdown, it is we’ve had time to consider what is important to us.
When something’s taken away from you, you realise what’s important. For most, it’s experiences you value over material things. Perhaps you’ve had thoughts of what you have spent money on and starting to re-prioritise.
We’ve experienced this with clients, moreso over recent years. Many are not wanting to wait till retirement to tick things off their bucket list.
It’s changed from having the best of everything…to using their wealth for experiences they value. After all, you’re not going to be sitting in your 90’s…on your rocking chair talking about your expensive house and cars, are you?
How has your thinking changed during the lockdown? Has it changed and if so, in what way?
#3 Focus On Short Term Ups And Downs In Investments.
With investment markets whipsawing all over the place. It’s hard to maintain focus on long term fundamentals. Inflation, being so low is now generally ignored.
Some, have even postponed the idea of retirement.
Others have panicked at first sight. Selling out completely as the thought of losing value in their nest egg is frightening.
Enter 2009. The great Global Financial Crisis. Many went in too hot. Only to be burned, sell out and never to re-enter investment markets again. Missing out on the 10-year bull market leading into the recent market correction.
We’ve heard off many stories recently, where the same action has taken place. The frightening thing is ignoring volatility risk or sequencing risk. Not having enough liquidity to manage lifestyle funding at the start. While managing the longer-term inflation risk or purchasing power.
This trend is one that is damaging if not managed well prior and into retirement. The fear, it’s realised too late into retirement.
One that concerns me the most with unadvised pre-retirees.
#4 Semi-Retirement Bridge.
The bridge between part-time and full-time retirement. Reduced working hours or even looking for less intense work to realise time freedom.
For some, it’s about making their money go further. For others, it’s keeping them mentally active in an area that interests them. While the income helps, it’s other, more meaningful benefits that drive these decisions.
It’s a balance between:
- More time freedom.
- Working with something that interests you.
- A way to transition into retirement. A way to test the waters to see how you will cope.
- Transitioning your social networks.
- Matching assets with liabilities.
Retirement Planning is moving towards more rigorous testing and scenario planning. After all, you only get one shot at this.
Your working life is all about transition your working capital to financial capital. Building enough financial wealth to fund the life you want.
Retirement is all about matching your assets to your ongoing liabilities, your spending. The ability to fund the life you want where you are more active in the early years of retirement or pre-load.
Having the flexibility to pivot so you can fund the life you want.
The old way of assuming a set withdrawal rate and average long term returns is too simplistic. It’s too important not to undertake more rigorous assessment and planning.
The financial planning industry is catching on. But unfortunately, many are still relying on outdated assumptions.
No longer is retirement planning a simple mathematic equation.
It’s about finding the balance between the life you want, the assets you have and how to deploy them.
Ready to simplify, uncomplicate, achieve absolute clarity and confidence in your retirement plan, then it’s time to chat. While we are in turbulent times, these are the best of times to get your retirement plan in order, so you avoid the mistakes many have made before you.
Click here to book your complimentary “Safeguard Your Retirement Strategy Call” now.
Here’s to living your best life!
Glenn Doherty – CFP – Money Mentor | Retirement Specialist for High-Networth Couples and Individuals($500-$5m) | Founder of Jigsaw Private Wealth
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