A new client was referred to us when one day suddenly he had been given the bombshell that he was going to have to retire almost straight away. He was 65 but had not planned to stop work until he was 67. As a partner of a professional services firm he thought he could control when he stopped, but it turned out this was his business partner’s decision to make, and he had no real choice. He came to us worried that he had not accumulated enough funds to be able to retire now, but now knowing whether he would be able to find more work.
At our Exploration Meeting, we established that he had a nice home, and a second property, plus a pension worth around £300,000, plus some savings. He was adamant in his mind that he could not afford to retire, and that he needed to get up to £500,000 before he could do so. His wife wanted a new kitchen, they didn’t want to downsize as they loved their home and one of their children lived abroad, so they wanted to be able to travel regularly in retirement. Their dream retirement now looked completely unachievable.
They also wanted to leave money behind to their children, and they could see no way of that happening either. As the main bread winner of the family, this was clearly causing him a lot of stress; he felt like he had let his family down by not saving more. So he needed our help to establish whether he could afford to retire, what his retirement income would look like, and if not, how we could go about fixing it.
We agreed we would review all of the pensions and savings he had and then build him a Lifetime Cash-Flow Forecast as part of an Efficient Financial Plan. This would give him the clarity he would need to see where he was today, and how bad retiring now would look. It would give him an overview of the rest of his life from a financial perspective.
What we found was that his existing pensions and investments were invested in poor performing funds, and also didn’t offer him the flexibility to retire in the way that he needed. Because there were several of them, there was no cohesive investment strategy, and had he stayed with them, he would have had to buy a fixed income that wouldn’t have been sufficient for him to retire on. What we also found was that if we consolidated his pensions and investments into a proper diversified portfolio, on a platform where we could better manage and control his income in line with his desired lifestyle, he could in fact afford to retire now. Not only that, he could afford to create the retirement he wanted, his wife could have the kitchen, and there would likely be plenty left over to leave to the children.
So what we built for him was a strategy that best utilised the rental income and made the best use of his pensions and savings by moving them into an environment where the investment risk was controlled, where they could increase and decrease their income as their lifestyle required, and where they could pay drastically less tax.
What this meant to him was that he didn’t need to look for more work. More importantly, he could start his newfound freedom. An opportunity to create his Life 2.0! As it happens, that was his next concern; what would he do with his time….. so that is where The Dream Retirement stepped in, but that is another story.