Retirement Planning - How Much Is Enough?
It is THE subject that we get the most enquiries about from new clients, and the one that greatly concerns many doctors and dentists - retirement planning.
To ensure we are always up to date with the latest developments, and to keep up with our CPD, we read a huge amount on this subject.
Recently, one article concerned the amount of time we spend as a proportion of our adult lives being retired.
The statistics looked like this: - in 1950, the average man spent 18% of his adult life in retirement.
- in 2010, this percentage figure had grown to 33%.
Now, the publication we found this in was from a company promoting guess what? Well yes, a pension! However, it's still a very interesting fact that over the last 60 years the amount of time spent not actually working was NEARLY DOUBLE.
It is clear that it is vital to get this planning right, and to put a lot of thought into the fact that if you are not at work for 60 hours a week, what are you actually going to do? Let's look at another survey by a company promoting pensions (there is a theme developing here...
).
This one analysed the percentage of working adults aged over 55 who felt ready for the financial implications of retirement.
The shocking figure was JUST 5%! A similar survey conducted in 2008 that asked the same question came up with 39%! It appears the recession has dented the confidence of many.
Another question asked what preparation had been done already by those approaching retirement.
Some of the main responses were: - Built up a savings pot, 31% - Sought independent advice, 15% - Invested in property, 12% - Spoken to a Bank/Building Society, 12% It was interesting (and depressing) for us to note that almost as many people used a Bank or Building Society compared to taking independent financial planning advice.
Is this figure likely to be much different in our 'niche' doctor and dental market? The fact is we don't know! We would certainly like to think so as many medics and dentists often take the time to research their options.
We would also guess that the proportion of people in the independent advice section who used a Fee Based Financial Planner as opposed to a commission based adviser was very small.
There is still a long way to go getting the message out there! Looking at those that had built up a savings pot, it would be very interesting to see exactly how they had gone about this, including deciding on how much to invest versus enjoying life now.
This is something we go into in massive depth with new clients, as they have usually been saving with no idea how much they really need.
There are usually 2 main reasons for this: - they are not sure how much income they will truly need in retirement - other assets have not been built into their overall planning to give some context On the latter point, what we commonly find with clients approaching retirement is that they will have large amounts of capital due to be paid out from various sources.
For example: - NHS lump sum - maturing investments - sale of practice - downsizing home (now or at a later date) - sale of other property - inheritances In the majority of cases it means that we can develop a strategy that results in the client taking low to medium risk with their investments, and still have enough to fully enjoy life and not run out of money before they die.
So we find that some new clients we agree to work with, say in their late 50s, have more than enough, as they have invested really well throughout their lives (even though they may not have needed to invest as much as they were).
We feel the real issue here is that they may well have wanted to spend more money on holidays or on their children, but felt that they could not 'just in case' they did not have enough.
This is why we firmly believe in cash flow forecasting - your own financial Sat Nav if you like.
One result of this a couple of years ago was that a new client that was investing a lot of money every month decided instead to invest future money into their dream holiday home now as they could clearly afford it (in fact they'd been 'hanging back' from making this purchase as they were unsure whether they could afford it now).
Of course having more than enough is never a terrible problem on the face of it, but it can play havoc with Inheritance Tax Planning! The Financial Tips Bottom Line Take truly independent and impartial advice from a Fee Based Financial Planner who will work FOR YOU and not the product provider.
One of the key things they will do for you is to measure your assets versus your needs, and come up with your very own strategy to get you from where you are to where you want to be, and with the minimum risk.
ACTION POINT It is vital you have a strategy you have confidence in.
Do you even have a strategy? Is your planning simply a collection of policies and the NHS Pension Scheme? Does your adviser use cash flow forecasts that demonstrate where you are in relation to your goals in life? If not, why not? If you are unsure how to proceed ask your adviser their views.
To ensure we are always up to date with the latest developments, and to keep up with our CPD, we read a huge amount on this subject.
Recently, one article concerned the amount of time we spend as a proportion of our adult lives being retired.
The statistics looked like this: - in 1950, the average man spent 18% of his adult life in retirement.
- in 2010, this percentage figure had grown to 33%.
Now, the publication we found this in was from a company promoting guess what? Well yes, a pension! However, it's still a very interesting fact that over the last 60 years the amount of time spent not actually working was NEARLY DOUBLE.
It is clear that it is vital to get this planning right, and to put a lot of thought into the fact that if you are not at work for 60 hours a week, what are you actually going to do? Let's look at another survey by a company promoting pensions (there is a theme developing here...
).
This one analysed the percentage of working adults aged over 55 who felt ready for the financial implications of retirement.
The shocking figure was JUST 5%! A similar survey conducted in 2008 that asked the same question came up with 39%! It appears the recession has dented the confidence of many.
Another question asked what preparation had been done already by those approaching retirement.
Some of the main responses were: - Built up a savings pot, 31% - Sought independent advice, 15% - Invested in property, 12% - Spoken to a Bank/Building Society, 12% It was interesting (and depressing) for us to note that almost as many people used a Bank or Building Society compared to taking independent financial planning advice.
Is this figure likely to be much different in our 'niche' doctor and dental market? The fact is we don't know! We would certainly like to think so as many medics and dentists often take the time to research their options.
We would also guess that the proportion of people in the independent advice section who used a Fee Based Financial Planner as opposed to a commission based adviser was very small.
There is still a long way to go getting the message out there! Looking at those that had built up a savings pot, it would be very interesting to see exactly how they had gone about this, including deciding on how much to invest versus enjoying life now.
This is something we go into in massive depth with new clients, as they have usually been saving with no idea how much they really need.
There are usually 2 main reasons for this: - they are not sure how much income they will truly need in retirement - other assets have not been built into their overall planning to give some context On the latter point, what we commonly find with clients approaching retirement is that they will have large amounts of capital due to be paid out from various sources.
For example: - NHS lump sum - maturing investments - sale of practice - downsizing home (now or at a later date) - sale of other property - inheritances In the majority of cases it means that we can develop a strategy that results in the client taking low to medium risk with their investments, and still have enough to fully enjoy life and not run out of money before they die.
So we find that some new clients we agree to work with, say in their late 50s, have more than enough, as they have invested really well throughout their lives (even though they may not have needed to invest as much as they were).
We feel the real issue here is that they may well have wanted to spend more money on holidays or on their children, but felt that they could not 'just in case' they did not have enough.
This is why we firmly believe in cash flow forecasting - your own financial Sat Nav if you like.
One result of this a couple of years ago was that a new client that was investing a lot of money every month decided instead to invest future money into their dream holiday home now as they could clearly afford it (in fact they'd been 'hanging back' from making this purchase as they were unsure whether they could afford it now).
Of course having more than enough is never a terrible problem on the face of it, but it can play havoc with Inheritance Tax Planning! The Financial Tips Bottom Line Take truly independent and impartial advice from a Fee Based Financial Planner who will work FOR YOU and not the product provider.
One of the key things they will do for you is to measure your assets versus your needs, and come up with your very own strategy to get you from where you are to where you want to be, and with the minimum risk.
ACTION POINT It is vital you have a strategy you have confidence in.
Do you even have a strategy? Is your planning simply a collection of policies and the NHS Pension Scheme? Does your adviser use cash flow forecasts that demonstrate where you are in relation to your goals in life? If not, why not? If you are unsure how to proceed ask your adviser their views.
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