It’s no secret that the way we choose to work and retire has been changing at a fair pace in recent times. If you were to put yourself in your parents or grandparents’ shoes, it is highly likely that their working life looked very different to the working life and retirement planning that we know today.
The not-too-distant generations experienced more structure in their working life as well as their retirement journey with a job for life and very few drastic career changes. Prior to its abandonment in 2011, the default retirement age also meant that employers could forcibly make their employees retire at age 65, even if they wanted to continue to work, so there was often a pre-determined agenda for when many people chose to retire completely.
Often, the ‘golden handcuff’ of largely sticking to one employer was the defined benefit/final salary pension scheme. A guaranteed income for life at retirement which accumulated as a result of building up many years of service in the pension scheme with the same employer and climbing the career ladder to higher wages over time. There is no shortage of media that tells us that the availability of defined benefit pension schemes has drastically declined and now most commonly we see defined contribution (sometimes known as money purchase) pension schemes available. This change means the risk of building up the pot and ensuring it is funded to a sufficient level to last your lifetime is left with the individual and not the employer or the pension scheme.
However, the introduction of pension freedoms in 2015 provided pension savers with more ways to access and control the flexibility over how and when they withdraw their pots. Naturally, with more options comes more complexity and therefore, the tendency for a need to be more involved in what your retirement landscape may look like. While the autonomy of the retirement process decreases it provides us with more choices to make over how our future is shaped.
Most importantly the way we live our everyday lives has changed. Historically, blended families were less common, career changes, retraining or studying as a mature student were less common and we were less likely to have children (or more children) later on in life. We are now much more likely to , start a business, have multiple income streams or change careers completely especially after the covid pandemic. We are also highly likely to change employers several times and change location more readily . Financial health and financial wellbeing in all areas is high on our agenda and we seek to work towards goals and values that previously we may not have had the confidence or ability to aim for or willingness to achieve.
Consequently, we are seeing a change to the traditional sense of the word ‘retirement’. The word itself almost seems old fashioned. Retirement planning for many is no longer working one day and then never contemplating work for the rest of your life. With newfound financial security and freedom over the ways you access pensions the ability to “retire” early is increasing and retirement is no longer a specific one-off event but more a gradual shift from working life to non-working life or a chance to fulfil a lifelong passion or dream.
Retirement planning is now perhaps much more of a life journey, a chance to reinvent or explore something new. Some may retire in the ‘traditional’ sense of the word more than once with many choosing to couple their pension provision with reducing hours, starting that business, turning a hobby into an occupation or trying something new they’ve always wanted to do. It could be going back to study later in life, stopping and then starting work again, doing that ‘bucket list’ aspiration whilst their health still affords them too and then pairing back their spending later as priorities shift. It’s not uncommon to see a 55-year-old set up a coffee shop to be family run which will allow further work for 20 years in a new passion and develop a future family income stream or legacy.
Whilst it is incredibly important to manage your retirement planning in the right way so that your provisions don’t fall short particularly with increasing life expectancy many are now planning a very different future from past generations and using cashflow modelling to enable them to visualise in easy to read graphs and charts how their future will look. What would you like your family’s future to look like?….what values and passions will shape your future?….when will you take ownership of your own retirement planning?
Contact me to discuss your retirement planning and your financial future
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