The Future of Retirement

The Traditional Retirement

The traditional journey through life was a three-step process: education, work, followed by retirement.

The age at which we retired was around 60 to 65 with the lucky few being able to retire in their fifties.

Traditionally, your employer looked after you with a gold-plated final salary scheme plus you got your state pension and you could expect to live another ten years or so.

A New Reality?

As we are now living longer and with the advent of new technology, the traditional journey through life is changing.

Whereas we may have left education at some point in our teens or early twenties, the advent of technology, and in particular artificial intelligence, means that education now needs to be considered a continuous pursuit throughout our lifetimes in order to learn new skills.

In the past we may have stayed with the same employer all our working lives or, at least, working in the same industry or profession. Today, employers can come and go, merge or be taken over and new technologies and cheaper labour and manufacturing processes can make whole sectors obsolete in a short period of time.

Changing employers and even career paths will become increasingly common.

When it comes to retirement, there are very few gold-plated final salary schemes left and the age at which we receive our state pensions is ever increasing. The burden of providing for our retirement has largely shifted from the employer to the individual.

With Increased Flexibility Comes Much Responsibility!

The terms on which we retire are now largely down to us.

We are now responsible for how much we save throughout our working lives and where we invest our contributions for optimum returns. Saving enough and making sensible investment decisions are crucial for a successful retirement.

To a large extent we can determine when we stop work. Although some employers will insist we retire at, say, age 65, others will allow us to work into our seventies. If full time work stops, we may be able to find part-time work or we can work as a consultant or non-executive director if our skills and experience are in demand.

We can also impact how long and active our retirement might be by taking responsibility for our health both physically and mentally as well as maintaining and cultivating our relationships.

“I Don’t Want To Retire”

When I have discussions around pensions and retirement with clients, there are a number of clients who tell me that they don’t ever want to retire. They usually have a negative view of retirement and somehow equate retirement with giving up or being ‘put out to pasture!’.

These clients may be business owners who want to remain within the business for as long as possible because they built it up from scratch and enjoy what they do.

They may be successful professionals who feel that they still have much to offer their profession and have the energy to keep working.

There are also those who feel that they would be bored or lack purpose if they fully retired.

Finally, there may be some clients who, for financial reasons, have to continue working for a few more years. For example, they may have got divorced and now need to make up some of their lost pension provision.

Financial Independence

Even where they are not looking to fully retire, in nearly all cases clients want to know whether they are or will become financially independent. This is because they want to continue to work on their own terms, in other words, they work because they want to and not because they have to.

The financial planning process becomes incredibly important to these clients and can bring huge peace of mind knowing that they have no financial worries and work becomes something that is both meaningful and provides purpose.

There is an old adage that in retirement you should have enough money to sleep well at night and sufficient purpose to get up in the morning!

The Life Journey of Future Generations

As our life spans and hopefully our health spans increase and as new technologies emerge so future generations may find a new pattern emerging when it comes to their life journey.

Instead of education followed by work followed by retirement, future generations may experience a continuous cycle of education, work, time off to re-charge and re-skill and back to work followed by another period of time off to re-charge and re-skill.

Retirement may also follow a similar pattern albeit on a smaller scale or work could be replaced by hobbies or volunteering.

Financial Planning In the Future

If the life journey of future generations changes so the traditional financial planning journey of accumulation followed by decumulation may also change.

We may see the need for greater flexibility, for example, there may be a need to access a decumulation pot, say, every ten years or so to enable people to take time off to re-charge and re-skill before returning back to paid employment in order to accumulate further capital.

We may see the advent of new financial products or changes to existing products to accommodate the need for more flexibility.

Conclusion

However our life journey pans out, having a financial planning strategy in place is increasingly important to ensure there is sufficient flexibility and financial resources at different stages of our lives.