August 7, 2024
For previous generations, retirement decisions were often a great deal simpler than they are today. People paid into a pension plan and made contributions to their State Pension, reached retirement age, and settled back to enjoy whatever a retirement meant to them.
But in the last few decades, that’s changed.
Life expectancy has increased for many of us, and our working lives have become less linear, with many people building multi-track careers during their working lives.
The number of people choosing self-employment has risen, and fewer people are seeing retirement as a ‘cut-off date’ beyond which they don’t expect to work at all.
Other people are opting for a phased approach to retirement – choosing to reduce their working hours gradually – or have decided to go back to work after taking early retirement during the Covid pandemic.
We recently took a look at some research by Aegon, understanding how the way we view life after 50 is changing: Retirement planning in your ‘second 50’. How longer lives are changing how we view life after 50. – Talis IFA
In this article, we’re going to think about what the second 50 looks like, and how that might drive your approach to financial planning.
What do we mean by the ‘second 50’?
One in four children born in the UK today can expect to live to almost 100, and many of us already over 50 can expect to live a longer life than generations before us. This longer life – and the happy prospect of more years after retirement – comes with increased expectations of travel (45% of us plan to travel more in later life), spending more time with loved ones (53%), or pursuing new hobbies (33%).
With more choices about how we live our lives in an ever-changing world, the better we understand what will shape our second 50, the better we will be able to plan ahead and make the decisions that will help to ensure we enjoy financial security.
The five fundamentals of the second 50.
As we move from the traditional three-stage life model of education-work-retirement into a multi-stage life characterised by new opportunities, it’s important to plan and prepare for the future we want. Everyone’s aspirations will be different, and (as most people know by the time they are approaching their second 50!) the path we take is rarely smooth and direct.
Aegon’s research identified five key areas that define how we plan for, and experience and enjoy later life. When planning for your future, it helps to consider what each of these represents for you.
The traditional model where we move from education into work (perhaps anticipating a ‘job for life’) then retirement is becoming less common. Our rapidly changing world often demands that we adapt and gain new skills.
We’re also more likely to encounter non-traditional working options (for example the rise of hybrid/flexible working).
We may have been faced by temporary gaps in employment, driving a career change or decision to retire early than we’d planned.
Some of us will have seen these changes as challenges – while others have embraced them as opportunities to spend more time pursuing interests, retraining or enjoying family time.
Whatever shape our working life has taken, starting early and maintaining healthy saving habits are important factors in building wealth and planning for a secure financial future.
When planning for retirement – whatever your age now – it’s important to get a clear picture of the level of income you’ll need to support your desired lifestyle, and to understand the path from your current circumstances to financial freedom.
Many people underestimate how much income they’ll need in addition to the State Pension, and are unprepared for how much they’ll need to save. Even those benefiting from auto-enrolment in a workplace pension may be facing a shortfall if they are relying on the 8% minimum contribution.
It’s also important to understand what your housing costs are likely to be. If you own your own home, will you have paid off your mortgage by retirement age?
An independent financial adviser (IFA) can help you clarify your current position, identify your financial goals and create a financial plan to help you get there.
With many of us putting off starting a family until we’ve established ourselves in our career, or having second families after a divorce, the number of people financially supporting school-age children during their fifties is increasing. Housing costs are also resulting in those children living at home for longer.
Many people in their fifties also find themselves with responsibility for ageing parents, experiencing both financial and emotional pressure.
When we find ourselves juggling multiple family priorities and responsibilities, it’s tempting to put off planning for the future until ‘tomorrow’.
But this is a time when we should be having open and honest conversations about the future, and ensuring that we have the appropriate financial protections in place in case of the unexpected. Your IFA can help you to decide what you need.
If you are also responsible for elderly parents, it’s also the time to make sure that they have plans in place to cover their own future care needs, and Power of Attorney (POA) in case they become unable to make decisions for themselves.
Taking care of our health is important at any age, but as we approach our second 50, many of us become increasingly aware of the need to look after our physical and mental health. We all hope to enjoy many more years in good health, but it’s important to be prepared for the need to manage significant health issues in later life (especially if you’ve already experienced health challenges).
Part of financial planning for our second 50 is ensuring that we’ve made provision for the cost of health and social care, should we need it, as well as putting in place policies to protect our income if we need to stop work unexpectedly.
An experienced IFA will encourage you to factor in the cost of care when you are planning for your future.
Your future wellbeing (including financial wellbeing) will depend on what’s important to you in how you want to live life in your second 50.
When we reach our fifties, many of us realise that what we believe will bring us happiness and fulfilment in our second 50 is very different from what we sought after when we were younger.
Whatever our aspirations, what’s important is to be clear about them, and to understand what financial needs we have to support them.
At Talis IFA, we take a ‘life first, money second’ approach. That means that understanding how you want to live your life is at the core of our advice.
The numbers are important, but what is most important is understanding what is important to you – your values as well as your aspirations.
If you are approaching your second 50 and this has inspired you to start the search for an IFA who can help you understand your path to a secure financial future, find a Talis IFA here.
We provide unbiased, objective advice in plain English, to help set you on the path to financial freedom.
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