What is retirement?
It’s possible to offer up various definitions, but from a financial planning perspective one way to think of retirement is: moving from a position where income derived from your labour covers your spending, to a position where spending is covered by the income generated by or drawing on your assets.
These assets may be many different things; pensions, investments, ISAs, savings, rental properties, your main property etc., but they are all things you own.
Common questions are: ‘do I have enough assets to make this transition?’, ‘am I on track to retire when I’m aiming to?’ or ‘what do I need to do to make sure I can retire when I’m ready to?’ To answer these questions, you need a plan.
Whilst you are working and earning a salary, your income should cover all of your spending needs as well as repaying any liabilities.
In addition to this, hopefully some of this income will go towards building your assets through savings and pension contributions.
A financial plan need not be complex, but having one is a key step to financial wellbeing and ensuring that you can realise your desired lifestyle, now and in the future.
Most importantly, it must be sufficiently robust to serve its purpose. Whilst a financial plan can be relatively simple, often the process of planning is more complex. For example;
• Using pensions, ISAs or a mix of the two to optimise capital flexibility
• What tax reliefs might be available to maximise the impact of your savings
• How to manage investment risk as you approach retirement
This is where a professional adviser can add value, but the answers to these questions are always determined by what your goals are for your retirement. i.e. where are we sailing to?
The punch in the mouth
Mike Tyson famously said: “Everyone has a plan until they get punched in the mouth.”
Financially speaking, this ‘punch in the mouth’ can take a number of forms. A stock market crash, an illness that prevents you from working, COVID-19 and redundancy etc.
In these often stressful or emotional times, it can seem natural to want to react or take action.
This is again where having a trusted advisor can be invaluable. Steering clear of knee jerk reactions and carefully amending plans is fundamental in avoiding potentially irreversible mistakes.
Sandringham Darlington guide you through all of these questions and to help you and your family plan for your financial futures.
If you are keen to begin your plan, Sandringham Darlington is offering a special offer to Luxe readers of a no cost 30-minute financial planning conversation.