This month it’s time for the latest in our series of age related articles – welcome to the world of the sixty-somethings! As you (potentially) approach the end of your working life, you are at a really important stage in your financial life. I hope to give you some food for thought to ensure you make the wisest financial decisions to see you through the next phase of your life.
Plan carefully for the end of your working life
It is really important that you are getting the best financial advice at this stage – there are so many significant decisions that need to be taken. You want to work with somebody who can confidently confirm to you the lifestyle that you can afford into the future, who can help you plan your financial life for the rest of your life.
Your adviser needs to have their finger on the pulse too in relation to all of the pension related opportunities that are available for you – maximising tax-free cash opportunities, carefully planning your post-retirement strategy and deeply understanding the various tax reliefs that are available to you. The days of saving until you’re 65 and then buying a fixed income for the rest of your life are long gone. Now is the time to start thinking about managing your pot of money wisely until the day that you die.
Of course if you are a business owner, you need to have clear line of sight of your exit strategy and how you will generate the maximum personal value from your exit from the business.
Keep saving while you’re earning
Now is not the time to ease off on your savings, instead you need to put your foot to the floor! Your expenses have probably reduced – your mortgage hopefully is in the past, the kids are educated and have moved out and you have more spare cash.
Remember your time horizon for saving is no longer age 65, it’s until you die. So the more you save now, the better your lifestyle will be later in life.
Review your investment strategy carefully
In the past when your time horizon was age 65, it used to be all about having everything in cash or other low risk assets at this stage. Now that people are financially planning into their 80’s and 90’s (and beyond), your time horizon is longer and your investment strategy needs to reflect that. I will always carefully consider your total investment timeframe before carefully constructing your investment portfolio for you.
An example of such a strategy that some people consider is an investment “glide path”. Instead of putting all of your money into low risk assets as before, some use a rule of thumb of keeping “age 100 minus your current age” in equities. So, a 65 year old would have 35% of their investments in equities. While such rules of thumb are useful, I will always look at your individual circumstances, your own specific attitude to risk and all of your available assets in deciding what’s right for you.
Know your current (& likely future) expenses
As the days of earning income draws towards a close, a significant factor that will impact your future wealth is your expenditure. Now is the time to get crystal clear on what you spend. So actively track your spending, know how much you’re going to need in the future to live the life that you want. Then I can demonstrate to you everything that is financially achievable for you for the rest of your life. Our Bellwether 360 service is specifically designed for this.
Keep your emergency fund full and protection in place
There can sometimes be a temptation to think that you’ve cleared all the hurdles and can now just start spending your hard-won savings. Unfortunately things can go wrong at any stage in life. That emergency fund that you had built up is still really important to see you through any significant bumps in the road.
Your life cover and specified illness cover are also still very important. You may not need as much cover as before, but you still need to protect your loved ones and yourself against future disasters. And it’s a fact of life that you’re also more likely to claim at this stage in your life too…
Think about future work (seriously!)
I suggest that you look at future work opportunities too. However you will be doing this as much for the mental wellbeing benefits as for the actual financial benefits. And you will only look at work on terms that suit you – doing work that you like, in a location that is easy for you and where the work hours really fit around the rest of your life. Work at this stage should be a source of enjoyment, not a chore!
As the world of work draws towards an end, you still hopefully have a very long life in front of you. So it is really important that you retain a long-term view of your finances and get really good advice in doing so. And that’s why I’m here. I want to guide you to allow you live the very best life that you can lead, for the rest of your days.