29th July 2014
Duncan Robertson, director of pricing at Aegon, gives his view on how to make sure you are ready for retirement just like you pack for your holiday.
I love holidays. I love planning them, I love being on them and (I am a little ashamed to say) I love telling people all about them. However, I love packing for holidays slightly less. Fortunately, this is an area in which my wife Pauline excels. She is the master of the holiday packing checklist.
Most of us hope that our retirement will be the ultimate holiday of them all; a time to be enjoyed and a reward for all the hard work put in throughout the years before. Unfortunately retirement, much like a holiday, does not always turn out the way people would like. We will all stand a better chance of getting the retirement we expect if know what we will need – very much like my wife’s holiday packing checklist
So, what should be on people’s retirement packing checklist?
Good advice: This is the first thing that needs to go on the list. Retirement can be daunting. People will likely require some help in understanding all the options, risks and opportunities available to them. There has been lots of commentary recently on the best way of delivering good retirement advice to people. Personally I am not too hung up on where the advice comes from as long as it is good and timely. In much the same way as travel agents and travel books have been replaced by social media communities and TripAdvisor, so the mechanism for delivering advice will change over time. What I am more hung up about is the timing of advice, which leads me to the next item on my checklist.
Funds: Whilst back in my youth I was all in favour of back-packing around Europe on £5 a day and sleeping on trains to cut down on accommodation costs, it is not how I envisage spending my retirement. I don’t ask for much but I do hope that having a single espresso macchiato each day won’t be regarded as too much of a luxury. It is pretty difficult to get away from, but if you don’t have sufficient funds in retirement, it will limit your options. The problem is that there is no quick fix: people need to start saving and they need to start saving early.
Protection from unacceptable risks: Once you are sunburnt you are sunburnt. There is no point slapping on the sun-cream after the event. Similarly people need to protect themselves in advance from events that are simply unacceptable to them. People need to assess what the minimum amount of income that is acceptable to them is and organise their retirement funds to make it highly unlikely that their income will fall below this amount. Some people will be equally concerned about the amount of money they will pass on to children and others. Retirement solutions can be put in place to maximise the chances that these wishes will be met. Importantly, different people will have different appetites to risk and will need different combinations of annuities, income drawdown and guaranteed income drawdown solutions.
Finally a camera, a pack of playing cards and a good book: retirement can’t be just about all the serious stuff above. Hopefully there will be time for a little bit of fun as well. Enjoy your holidays!