There are few prospects more frightening than running out of money in later life. That’s why it’s so important to start investing early, to put enough money away, diversify your investments, control your costs and manage your behaviour.
But it’s a grave mistake to think that investing for retirement is all about money. Retirement is one of life’s biggest transitions, and if you don’t properly prepare for it, having less money to spend than you’d like to in your later years might not be your biggest worry.
Don’t misunderstand me, retirement is hugely exciting. It’s your chance to live life on your terms, and to do the things you always wanted to. Planned well, it can be the most rewarding time of your life.
But, sadly, it often proves to be anything but. To quote Your Complete Guide to a Safe and Secure Retirement by Larry Swedroe and Kevin Grogan, “fewer than half of retirees enjoy their first year. Many experience symptoms of depression… (and) the segment of society with the fastest growing divorce rate is couples over 55.”
There are three crucial investments you need to be making in the run-up to retirement that have nothing to do with money at all.
1. Physical and mental health
Your parents and grandparents were right: if you don’t have your health, you don’t have anything. You’re far more likely to enjoy a long and fulfilled retirement if you really look after yourself. Developing good habits of nutrition, exercise and sleep is hugely beneficial, and you should pay attention to your mental health as well.
2. Personal development
As the clock ticks down to retirement, we can be so focussed on building our pension pot and achieving our professional goals that we forget more fundamental issues. What do we really want from life? What are we passionate about? You can’t properly plan for, let alone enjoy, retirement until you’ve thoroughly considered and answered these sorts of questions. Investing time in yourself, in self-discovery and personal growth at this stage of life is critical.
Far more important than money in retirement, as in life generally, are relationships. Adjusting to retirement can take its toll on even the closest couples. Talking things through with your spouse about the changes and the challenges that you will undoubtedly face will help to smooth the transition. Being part of social networks and having plenty of friends — and crucially not just work friends — are very important too. So if you’ve neglected this aspect of your life, now is the time to focus on it.
The importance of a retirement plan
You may be wondering what all this has to do with financial planning. Are these really the sorts of areas that financial planners are supposed to be interested in? The answer, emphatically, is yes.
Money is purely a means to an end, and not an end in itself. It’s an enabler. Its purpose is to support the life you want to lead. Working out what that life looks like, and then developing a plan to make it happen, is what financial planning is all about.
Yes, of course you’ll need reassurance form your adviser that you’re still on track financially. But far more important in the years before retirement is that you use your adviser to assess your priorities in life and to develop a life plan — not just a financial plan — for your life beyond full-time employment.
If you’re starting to think about retirement and haven’t yet engaged a financial planner, it really is time to find one.