From a career perspective, you may feel ready to stop working and enjoy a more leisurely lifestyle. With the potential to span a number of decades, retirement should not be viewed as a one-off event, but rather an entire life stage that needs to carefully planned for, taking into account financial, logistical, emotional and psychological factors. If retirement is on your dashboard, here are some questions to ask yourself – and answer.
Where will I live?
This is one of the most important questions you can ask yourself because where you live affects your ability to engage with family and friends, your proximity to healthcare facilities, the cost and availability of entertainment, your access to a support system, and the weather you enjoy, to name just a few things. Buying and selling property is expensive, and waiting lists to enter retirement villages can be ridiculously long, so give very careful thought as to where you want to live when you retire and what kind of facility will work best for you. Some retirees love the idea of a retirement village, communal dining halls and Bingo evenings, while others envisage downscaling to a smaller lock-up and go unit that will suit their travel ambitions. If your longer-term retirement plan depends on you unlocking capital held in your family home, give careful consideration to the timing of the sale of your home, bearing in mind that you want to avoid delaying the move until you are forced to sell to address liquidity shortfalls.
Do I want to retire or do I really want to escape a job I hate?
Be absolutely clear on what is driving your desire to retire. If you’re stuck in a job that you intensely dislike, you may be feeling tired, undervalued and burnt out, making retirement seem like the obvious decision. With jobs in short supply and high unemployment rates, you may think your prospects of finding alternative employment at this ‘late stage’ in life are slim. Setting these thoughts aside, however, be honest with yourself about what is driving your decision. If you had a job doing something that you really enjoyed in a company that valued your skills, would you still want to retire? If the answer is no, then start considering alternatives to retirement such as re-skilling yourself, setting up a business on the side, training or lecturing, offering your skills to other companies on a contract basis, or monetising a hobby or passion of yours.
How long must my money last?
No one knows how long they will live, but most people have a number that they feel comfortable with when putting their retirement plans in place. Be careful of under-estimating longevity when planning for your retirement future, and keep in mind that women tend to live on average between two and five years longer than men. Whatever life expectancy you choose to build your retirement plan around, be sure that you are comfortable with it and that your plan is sufficiently robust to absorb the impact of you living longer than anticipated.
How much do I need to live on?
Do not assume that your retirement expenses will be much lower than your current living costs. Firstly, retirement villages are expensive, as is frail care and assisted living, and it is difficult to accurately predict what the costs of living over a period of 20 or 30 years will do. Secondly, your retirement budget should be designed to support your lifestyle goals in terms of socialising, entertainment, travel, experiences, hobbies, sports and charities. Take time to prepare a realistic retirement budget that is fully representative of the retirement you wish to live.
Who will be my support system?
As you age, having a dependable, available support system becomes more critical. Declining physical ability and mental acuity may lead one to rely more and more on others to assist with acts of daily living, attending to personal affairs, and managing one’s finances. The elderly are a particularly vulnerable group who can easily be taken advantage of by those with ill intentions and it is important that you surround yourself with a trusted team that you can fully depend on. If your children have emigrated, finding a reliable support system will be even more important.
What am I going to do all day?
If you plan to retire at age 65, you could well spend 30 years in retirement – that’s 1 560 weeks that you need to fill. When consulting with clients about their planned retirement, we often advise them to take a weekly planner and get them to fill in the blanks so as to account for each day of the week in their retirement. While you are working and chasing deadlines, time may seem to fly past too quickly. When you are sitting at home with no emails, meetings, projects, phone calls or clients messaging you, time can stand still allowing boredom and depression to sink in.
What are my retirement goals?
That said, be specific about your retirement goals. More importantly, ensure that they are aligned with your spouses. If you intend to spend the majority of your retirement fishing at your holiday home up the coast while your spouse envisages a socially active retirement in the city, the two of you will need to work on a vision of retirement that can work for both of you.
How will I cover healthcare expenses if I need frail care, assisted living or home nursing?
One of the benefits of retiring early is it is likely that you still enjoy good health. However, many illnesses and ailments are a function of ageing and you will need to prepare financially, logistically and psychologically for a time when your health may fail you. Your healthcare needs at retirement may be confined to the costs of your medical aid, gap cover and a few over-the-counter medicines, but the nature of your medical expenses can change dramatically as and when your health deteriorates. As such, we always advise that our clients build a long-term healthcare plan into their retirement plan taking into account the costs of frail care, assisted living and/or the costs of home nursing – none of which come cheap.
What happens when my group life cover falls away?
If you are retiring from an employer group, bear in mind that your group life and disability cover will automatically fall away. It is highly unlikely that you will be able to take out long-term insurance cover at retirement age, so it is important to understand the impact on your finances and your estate planning should your group cover fall away. How does losing your group life cover affect the liquidity in your estate? Will all your debt be settled in the event of your death? What other group benefits will you lose on retirement, and do you need to replace them?
Do I need to generate an income at retirement?
If you are intent on retiring from your job but still need to generate an income after formal retirement, be sure to undertake careful planning in this regard. Many industries are quickly being disrupted, and new technologies are making it quicker and easier for goods and services to be accessed. If you have a business idea for generating an income in retirement, be sure that it is supported by a robust business plan. If your intention is to seek contract or part-time work to generate income, it may make sense to secure these contracts in writing before retiring and then hoping for the best.
How easily can I re-enter the workforce?
If you are dependent on generating some form of income in your retirement years, it is wise to consider your prospects of re-entering the workforce if your ideas for earning income don’t come to fruition. If there’s even a remote possibility that you may need to find some form of employment in your post-retirement years, it’s advisable to ensure that your skills and knowledge remain updated and relevant to your area of expertise.
Do I have access to emergency cash?
Be sure to keep some discretionary funds aside that are easily accessible in the event of an emergency. Be cautious of tying all your retirement funds up in a life or living annuity as this can cause cashflow problems later in retirement, especially if you need to access a sizeable amount of money for instance to cover the costs of a wedding, overseas travel or to upgrade a vehicle. Retirement planning involves a delicate balance between harbouring your capital in an appropriate annuity structure and retaining sufficient capital in discretionary vehicles to ensure liquidity into the future.
What will my financial position be if my spouse dies?
An important part of holistic retirement planning is to develop scenarios in order to prepare for different eventualities. An important consideration is understanding the impact on your retirement funding in the event that your spouse passes away before you. If your spouse has a pension or annuity income, it is important to understand if and to what extent this income reduces in the event of their death. Further, if your spouse has a life annuity, keep in mind that the policy will terminate in the event of their death, and you will need to plan effectively for this eventuality.
Retirement is a significant life stage that requires careful planning and should not be undertaken without considering the logistical, emotional and psychological effects that ceasing to work will have on your life.