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As you plan retirement finances, it’s natural to worry about how far your money will stretch. No one wants to reach their later years worried about meeting financial commitments because they’ve spent too much too quickly. However, spending too frugally and missing out on dreams is just as much of a risk.

It’s easy to see why overspending during the initial years of retirement is a concern. People often go from a regular source of income to having a lump sum in their pension that they need to decide how and when to access. It can be a daunting decision.

Not only do you have to consider how much you spend on a monthly or annual basis but how many years it needs to last for. Compared to previous generations, modern retirees will spend far more of their life in retirement. That’s obviously a good thing, but it comes with the challenge of making sure your pension can last for three or four decades.

On top of this, longer lives mean more of us will need some form of support in later years. Whether this is simply a carer that checks in once a day or moving to live in a residential home, this comes with costs. Retirees are increasingly having to consider the possibility of care and how it would be funded. As a result, setting aside a greater portion of their pension for later years is becoming common.

So, it’s easy to see why those in retirement may be worried about spending too much too soon.

Being too frugal in retirement

But the flip side of the worry of overspending in retirement is being too frugal.

After a lifetime of saving for retirement, it can be difficult to switch to a mindset where you’re happy to deplete assets, whether it’s your pension or other savings you’ve built up over the years. However, it can lead to a retirement that’s promised much, and that you’ve worked hard for, falling short of expectations, not due to finances but because of your lack of financial confidence.

Worrying about how long pension savings will last can mean missing out on opportunities or experiences you may have been looking forward to. It could be a dream holiday to a destination you’ve always wanted to visit or simply having a bit more day-to-day spending money to indulge in luxuries or trips out.

If your retirement isn’t living up to what you’d hope or there’s more you want to achieve but you’re not sure if you have enough saved, financial planning can help you align the two areas.

How financial planning can help

We often find that it’s not a lack of saving and planning that holds retirees back from achieving aspirations. But rather the fear of the unknown and uncertainty about what they can do with their savings. This is an area of financial planning we can help with.

Having a professional look over your finances, with your goals in mind, can give you the confidence to live the retirement lifestyle you’ve been looking forward, safe in the knowledge that you’ll still be financially secure during your later years too.

One of the tools we use here is cashflow modelling. This allows us to input your financial details and show how your wealth will change over time depending on the financial and lifestyle decisions you make. For example, it can model how taking a lump sum in early retirement, increasing annual income or supporting loved ones with a financial gift will affect your pension in the short, medium or long term

It’s also a tool that can be used to model those ‘what-if’ scenarios that may be holding you back from fully enjoying your retirement. This could include:

  • Investments not performing as well as expected
  • Needing care in later retirement
  • A partner passing away
  • Facing an unexpected cost

By being able to visualise these impacts, and putting measures in place to protect your finances and plans where necessary, you can have greater confidence in your spending. Financial planning can help you make the most of your retirement provisions.

If you’d like to discuss your retirement plans, please get in touch. We’d be happy to discuss what you hope to achieve in retirement and how your savings can help you do so. We want our clients to have complete confidence in their financial plans, allowing them to focus on getting the most out of their retirement years.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.