12 Dec Bringing a Fresh Perspective to Financial Planning & Advice – Benefits of Retirement Planning
Your future is unique to your needs and wants, so there is no “one size fits all” advice; is what I’ve learnt as an intern at Tri Everest Wealth Management Limited. What I aim to do is use my newfound understanding and experience from working here for the past 3 months, to explore simply the process and benefits of financial advice through the lens of retirement planning, which includes ambitions and plans that you might rightfully consider as you prepare for retirement.
Am I confident my lifestyle will benefit my future?
As a student, I have found myself asking this question a lot, mostly due to my inexperience, and recent introduction to the topic at the University of Galway. What I have learned however is that the benefit pursued is up to you. The part the Government plays in your future is setting a Normal Retirement Age that you can retire at but it’s up you should you wish to retire earlier or later. They provide a basic retirement income with the State Contributory Pension, should you have the required amount of PRSI years of service, but it might not meet the level of income you have now after you stop working. If there’s a will to boost your future, there’s a way and the system allows for it – “The best way to predict the future is to create it.” – Peter Drucker. All that you need is a plan and some professional advice to set it in motion and keep it on track. In retirement, you may face challenges through change of routine, options for spending, and legislation regarding taking out and claiming your pension pot. Experiencing something new is always intimidating, but through conversation and discussion with an advisor, this stress can be alleviated. Although I am not considering my pension contributions yet, I find it more suitable to monitor my own spending and savings. Furthermore, I have been influenced to always ask myself if I am exposed to risk, and do I have an emergency fund set aside to cover my expenses arising from these risk events. As such I am confident that this practice will benefit my future.
What income will I live off?
When planning how much income you wish to have annually in retirement, you must be realistic and compare it to your current salary as a base. Should you wish to have a lifestyle that is the same as or better than now, you must plan accordingly. Throughout my experience working on graphing future cash flows I have seen how quickly money can be spent and as such I recommend graphing tools and pension calculators as additional points of reference when discussing with your advisor. If you plan to retire early and leave work for good as soon as possible, there are a variety of factors to consider. To comfortably afford to retire early, you can’t cut corners and need to reach a target retirement fund early as well. Just know that if you are not making enough progress towards your target pension fund an advisor can estimate the progress you are making towards this goal and advise the action needed to reach it. Once you retire, taking out a 25% tax free lump sum from a fund can give you some financial freedom. I believe this can be a vital tool in starting off your retirement years strong, as it gives you the ability to adapt your plan accordingly.
Can I change my lifestyle?
I have seen a variety of interesting options available to clients in general, which may involve changing jobs, traveling or living abroad. I have learnt that almost all decisions and lifestyle changes can be quantified which can help rationalize the effects and cost incurred from going through with these choices. I know personally, if I were to consider moving somewhere with a warmer climate such as Spain or Portugal, I would subsequently consider the country specific taxes and laws. This includes exchange rates, property purchase laws, and double taxation agreements. This is an important consideration as you may not be used to how the country is managed. However, the weather can still play a big part in my final decision as the enjoyment I would get out of moving abroad could almost feel like a long holiday. Should you wish to do the same in retirement, a similar consideration could prove useful. Work has the potential to be a key motivator in retirement, as some people are work-driven, and should you wish, you can continue working without impeding any personal pensions. I believe lifestyle is important and for some people no change is preferable. The upside to doing this is that you allow your pension funds more contributions and time to grow. Whatever lifestyle you wish to live an advisor can help quantify its effect on your financial plans.
In the last post I aim to explore the lessons I have learnt from past financial advices that we can take to improve our lives now.
-ERNESTAS