Preparing for retirement – a five-year plan

As the saying goes, ‘tomorrow belongs to those who prepare for it today’. While for many of us retirement feels like a conceptual point in the all-too-distant future, in reality it has a tendency to sneak up on people.

The shift into retirement presents a major lifestyle change and is certainly something worth considering well ahead of time. In fact, being cognisant of one’s proximity to retirement is the first step to smoothing the transition. Typically, a five-year lead-in provides the right amount of time to formulate a plan, develop an image of what retirement might look like and determine the various steps needed to get there.

The most pertinent questions will naturally centre around money and require some honest introspection. When can I afford to retire? And how much money will I need to achieve my lifestyle goals? To answer the first question, it’s important to have a clear image in mind of how you wish your post-work life to be shaped. Depending on the answer, the outlook for your desired retirement age may change or adjustments may need to be made to your five-year plan.

It’s when facing such questions that the benefits of professional financial advice can pay dividends, quite literally in some cases. Financial advisers are trained to probe your finances for risks and weakness and contrast the results with your lifestyle expectations. Obtaining advice as early as possible in the process will raise the probability of meeting your expectations, as the adviser will be able to offer a wider range of options and the best routes to success.

One slightly uncomfortable aspect to this process will be the consideration of one’s own mortality – how long do you expect to live? Estimating life expectancy, although far from an exact science, will afford some parameters to your financial plan and assist with forecasting your cashflow requirements. Of course, none of us have a crystal ball – but we can consider our family histories and any ailments or illnesses to help build a clearer picture. Ultimately, undergoing this exercise with a professional adviser will allow you to more realistically budget for your retirement and have greater comfort in your ability to achieve your objectives. Life insurance in this area is another worthwhile consideration, particularly with a view to your family’s future should the worst happen earlier than expected.

Those moving closer to retirement will need to closely examine their income and expenditures as part of their preparations. Again, this is where enlisting a financial adviser may bear extra benefits, as they will be able to pull together your existing income streams, from pensions and savings accounts through to real estate and unusual items such as royalties. An adviser can then help you paint an accurate picture of the potential ongoing expenses of your retirement plans and lifestyle goals, and assess whether they match a holistic overview of your expected personal balance sheet. In some cases, the outcome of this exercise may cause a re-thinking of your objectives or, at very least, your route to achieving them. But by preparing for this five years in advance, you will be afforded with a far greater opportunity to reach your goals and the retirement that you desire.

Above all, the main benefit of beginning your retirement process ahead of time lies not so much in the future but in the present. As we all know, circumstances can change and life can move quickly. Rapid changes such as unexpected illnesses, deaths, employment termination and more can drastically impact your retirement outlook. By engaging with an adviser to review your plan on a regular basis, you can take comfort in an additional layer of professional oversight to keep your goals on track.

After all, even five years can pass very quickly and preparing for any less time can make retirement seem like it came out of nowhere. So why not afford yourself peace of mind by preparing today for a better tomorrow?