Why Retirement Planning Isn’t Just About Money

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28 May Why Retirement Planning Isn’t Just About Money

The fear of dying is high on the list of people’s biggest fears. But for most of us, this fear is unfounded. Thanks to medical advances and improvements in social welfare, we are living longer.

Retirement income planning is particularly challenging because we are planning for a finite, but precisely unknown retirement period. Without the proverbial crystal ball, it is tricky to estimate how long we are likely to live.

A major challenge to working out whether you will run out of money is understanding how long you will live (longevity). In retirement planning, probability of survival proves a valuable metric.

The ONS cohort data in the chart below shows the survival probability for the average 65-year-old male and female. There is an 11% chance that a 65-year-old male will celebrate their 100th birthday, and that rises to 15% for a female of the same age. For a couple of the same age, the probability that at least one of them will live to age 100 is a whopping 24%!

ONS Data longevity image May 2019

This means that 1 in 4 couples currently retiring at the age of 65 need to plan for a 35-year retirement! That is 12,775 retirement days!

While it is important to get the financial aspect right, many factors contribute to a successful retirement including: figuring what you are going to do with your time, (see https://planningyouradventure.co.uk/ for inspiration!) keeping physically and mentally active and spending time to achieve what matters to you.

As Joseph Coughlin, founder of Massachusetts Institute of Technology AgeLab pointed out, “retirement planning for most has been about numbers – savings and the amount of money necessary to ensure financial security through the years” – which certainly is not incorrect, however it certainly is an incomplete perspective. Reframing retirement for what it is, one third of adult life forces us to realize that there are far more opportunities (and challenges) than our current idea of retirement planning includes.

Therefore, it is important to be clear and decisive regarding your retirement planning. You need to have a vision not just of how you are going to spend your money, but also how you are going to spend your time.

Coughlin lists several non-financial questions worth thinking about in the context of retirement planning: “What will we do with all that time? – work part-time, play, travel, learn something new, remarry, volunteer, provide care? Have we made the plans, and established the connections, and formed the relationships necessary to engage in those activities before punching-the-clock one last time and entering into retirement?”

Thinks about your future years. Things ‘second life’ not retirement. Don’t underestimate how long you might live. Plan it out. Prepare for it. Speak to us at Tandem to help you.