Some people dream about retirement, others plan assiduously for it, and for others, it just comes along. Retirement means many things for different people but knowing when you can afford to go depends on your number – the level of assets that you need to be certain that you do not need to return to work again.
The Number – What Do You Need for the Rest of Your Life, and What Will it Cost – by Lee Eisenberg has been a New York Times bestseller for years and is a book that we have given out to clients when they have found it difficult to work out when is the best time for them to give up work.
Some people dream of a retirement date, maybe their 60th birthday – some even earlier. However, framing your retirement around a specific date is often not the most practical solution.
The Number is about turning everything around and looking at exactly what your ideal retirement looks like, feels like, even smells like. This is then costed out carefully, with estimates for rates of growth and inflation, and is converted to a number – the amount of wealth that you need to achieve to be able to make that big step into retirement.
Everyone’s number is different, and bigger is not always best. We have seen clients who strived to make a number that they were never going to achieve, and others who have decided that they will not go back to work, so their number is what they have, and they then make everything work around that.
So how is your number made up, and what is a ‘comfortable’ retirement income?
Ultimately, it depends on how you want to spend your retirement. Research indicates that in the UK a couple would require a total income of £47,500 per annum, while a single person would need £33,000 to live comfortably. However, we have seen many people have a great retirement with significantly less – and people who have had significantly more not have a fulfilling retirement.
The key is to focus attention on your own situation, finding out what makes you tick and what it is that you really want from your retirement. Fixed expenditure often remains similar, perhaps with the removal of items such as commuting costs.
You can then start delving into the variable expenditure – which is where it starts to get interesting. Will it be going to the theatre every week, taking up sailing, or is it holidays that float your boat? The more you understand about what makes you tick the more accurate your number is going to be.
This is then when you need the help of a professional – your Wealth Strategist. With the help of comprehensive cashflow forecasting using specialised software, you can start to look at the best way of accessing your capital and the robustness of your plan.
In some instances, this can mean that you already have enough to stop work. If not, you can quantify how much more needs to be done to achieve your financial goals.
If you would like to find out what your number is, or to look at the best way of maximising your income in retirement, then please contact us today and we can arrange a meeting with a Wealth Strategist for you.