Leaving work and creating a new life for ourselves beyond work is arguably the biggest change we face in our lives today. Of course, money plays a huge part in planning for retirement. But there all sorts of other issues involved, including social, emotional and psychological ones, for which many retirees are, frankly, unprepared.
NOEL WATSON is a financial planner based in Surrey who specialises in helping clients through that often difficult transition to retirement. In the first interview in this series, Noel explains why having a retirement plan is so important — and, crucially, how to go about writing one.
Noel, how did you come to develop this niche in retirement planning?
I was originally an engineer. I worked at Rolls Royce Aerospace in Bristol, then taught myself coding and went to work in the City. I started talking to financial advisers around the time of the global financial crisis. But I didn’t feel they were really offering me anything of worth. I had two young children at the time, and the advisers I spoke to were concentrating on the investment side of advice. I thought there had to be more to an adviser’s offering than this. So I studied for my exams and escaped the City in 2017 to become a financial planner. I soon began to specialise in the retirement planning space because that’s where I feel I can add most value.
You’ve now written a book called Planning for Retirement: Your Guide to Financial Freedom. Tell us about that.
It’s a book that I’ve been meaning to write for a long time, and the pandemic gave me the opportunity to do it. Retirement planning is a complex area, and for some it can seem very daunting. This book is designed to guide people through the process and give them confidence and clarity, whether they’re doing it on their own or using an adviser.
Retirement is a huge life change. Why is it important to have a plan in place for it?
Retirement has changed dramatically over the years. The traditional model was like this: you worked for one company for, say, 40 years, you finished work and put your feet up on the sofa, and you probably got about 10 or 15 good years. But now, in the modern world, people tend to have good health further into older age, and we typically now plan to age to 100. So if you imagine someone coming up to the age of 60, they may have 40 years ahead of them.
Prior to retirement, our lives are quite well-structured with children and jobs and so on. But at age 60 or 65, you’ve got potentially 20 years of good health ahead of you. How are you going to fill your days? That’s what you need to try and do. You need to build a plan to give you the confidence to finish work and make sure you’ve got activities to look forward to for the rest of your life.
What can go wrong if you don’t have a retirement plan?
I see this often. If you don’t have a plan, there’s always the worry in the back of your mind that you’re going to run out of money, you’re going to be bored, or you’re just not going to have a purpose in life. So say you decide, at aged 60, that you’re going to walk into work tomorrow and hand in your notice; are you really confident that the next 30 years are going to be optimal?
So how do you go about producing a retirement plan? And how detailed should it be?
The starting point is to ask, what is the cost of your desired lifestyle? You could be the sort of person who would be happy living on a remote island in a tent — that’s not expensive and you could probably do that quite easily — but you might not be that person. You might want certain luxuries. Everyone’s got a certain lifestyle that they aspire to and want to enjoy in retirement.
So the very first point is answering that question: what is the cost of my desired lifestyle? To do that, you need to start by working out how much you are spending now. That’s probably harder than it sounds because not many people look at exactly what they’re spending. Once the client and I have established what they’re spending now, we map that onto early retirement spending. For example, you might finish work and you’ve got all this spare time, so you want to go on more holidays. Of course, it’s bound to be an estimate, but you actually need quite a detailed expenditure plan, from now until later life.
What sort of categories, then, do you suggest including in that plan?
As I said, it’s about calculating the cost of your desired lifestyle. So look at what you’re spending now. You’ll be spending a certain amount, for example, on holidays, transport and so on. But how might that change as you move into early retirement and late retirement? If you’ve still got your health and a sharp brain in early retirement, what do you want to do? Remember, you only get one chance to do it, and your chance to do it is now. So you should break it down into early and late retirement.
You should think as well about the big-ticket items. Do you want to help your children get onto the property ladder? What about the grandchildren? Helping grandchildren get their first step on the housing ladder is a long way down the road, but you have to think ahead about these big-ticket items and how you want to help the younger generations if you can.
You probably want to think about later life care, because what you don’t want to do is get towards 85 or 90 years old and then think about how you’re going to be looked after if you can’t look after yourself. So it’s all about trying to remove the unknowns and the uncertainties to give you the confidence that you can finish work at your desired time.
You can find out more about Noel Watson’s book, Planning for Retirement, and order a copy here.
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