Wouldn’t it be nice to be able to retire?

Many people have worked a long and hard-working life and are dreaming about retirement. They are often held back by the fear that their money will dry up, or that their standard of living will drop if they give up work. This is where an independent financial adviser can really help. 

How cashflow projections can really help

Using conservative assumptions, an adviser can build up a picture of your income and expenditure and produce cashflow projections to indicate if and when your retirement funds are likely to run out. This can be for a specific pension or investment or for your whole financial universe.

The value of this information should not be underestimated. If the data input is full and accurate, the projections can provide a good idea of whether your funds will last for the rest of your life. Projections can even show whether there are likely to be excess funds available at the end of your life which can be passed down to relatives, or whether your income needs to increase or expenditure decrease to match your objectives and lifestyle needs. 

Regular client reviews

However, we know that people’s circumstances never stand still for long, so Dentons Wealth conducts regular reviews for its clients to allow for changes in income or expenditure, inflation, receipt of State Pension, private pensions, windfalls from inheritance or investments, health changes, unexpected costs, tax changes or anything else that might happen.

The Financial Conduct Authority are very keen on financial advisers giving advice in this area, which they refer to as ’sustainability of income.’ Advisers must first identify clients who have retired, and it is a ‘grey area’ as to what this means. 

How do we define retirement

At Dentons we define retirement as starting to take a regular income from any investment pot or pension for the purposes of retirement. 

Once we identify that you are thinking about retiring, at your next investment review we will invite you to undergo our retirement process to understand what your finances could look like in retirement.  This means reassessing how you feel about investment risk and your ability to withstand it, asking questions about why you need to take income, and the level of income required, identifying all potential sources of income, and how your expenditure might change if you are giving up work.  We can then run cashflow projections to establish how long your income will last. Any recommendations will take into consideration your state of health.

Before we undertake the work, we provide an estimate of how much this will cost. The fees are time-costed and may vary depending on the number of investments, pensions, and anticipated expenditure. 

Do you need to take advice?

Some clients may decide that they do not want to take advice. This is a shame as it leaves them in the position of not knowing or being able to guess how long their money will last before it runs out. The worst-case scenario is that they would need to sell their house to fund their income needs, or rely on state benefits, and suffer a significant drop in their lifestyle. Family members may not be able to support them, and they may rue the lack of planning in earlier years when they could have done something about it.

Regulated advice - a cost well worth paying for

What this advice provides is ‘peace of mind’ and that is a cost well worth paying for. Many people focus on worrying about today to the exclusion of thinking about tomorrow. Retirement can be a complicated time with not only financial but emotional issues to face. We can’t always help with emotional issues but at least we can help bring financial issues into sharper focus!

This article does not constitute advice, and we recommend obtaining financial advice from a regulated financial adviser before making any retirement decisions.