13th February 2023 - Sean Banks

Is your mindset holding you back from enjoying your retirement? Financial planning could help

When you think about retirement planning, what challenges come to mind? While ensuring you have enough saved and don’t run out of money are common concerns, there is one you may have overlooked: changing from a saving to a spending mindset.

To secure your retirement, putting money away has likely become a habit you’ve embraced for decades. Perhaps you’ve contributed to a pension, made sure your mortgage is paid off or invested with a long-term plan. These positive habits have helped you towards greater flexibility and more security later in life.

However, once you retire, it’s not just your routine that changes – your relationship with money changes too.

This is the phase of your life where, rather than building up assets, you’ll begin to deplete them. You may take an income from a pension and draw upon other assets to meet your more aspirational goals. While a happy retirement is what you’ve made sacrifices for in the past, it can be more difficult than you think to start spending the nest egg you’ve created. 

Failing to switch your mindset could mean despite efforts made during your working life to build the retirement you want, it falls short of expectations, even if you have enough to reach your goals. 

So, how can financial planning help create a retirement mindset?

Financial planning can help you understand the lifestyle you want

When you think of financial planning, it’s probably the money side of things that first comes to mind, such as managing investments or highlighting potential tax allowances. This is an important part of financial planning, but it’s a small piece of the jigsaw. 

Effective financial planning starts with understanding what you want to achieve. For those at retirement, focusing on the life you want after work is an essential part of the process. Do you envision travelling the world, retiring by the coast, or discovering new hobbies? 

You’ll feel more comfortable depleting your assets once you’ve figured out what you want your retirement to be. A report from Aegon finds that only 1 in 5 people know which day-to-day experiences give them joy and purpose. As you get ready for retirement, you need to think about what you’re looking forward to. 

Once you set out your goals, the financial planning process starts to look at how your assets and actions will help you reach them. 

A long-term financial plan can give you the confidence to deplete your assets

One of the reasons retirees are reluctant to deplete assets is worrying they’ll run out of money. It’s a sensible concern – the decisions you make at the start of retirement could affect your finances for the rest of your life.

Yet, spending too little during your retirement could mean you miss out on meaningful experiences. 

A survey from abrdn found almost half of retirees worry they’ll run out of money during their lifetime. Despite this, only 1 in 5 people are seeking professional financial advice. A financial plan tailored to achieving your personal objectives offers a sense of confidence and financial security you may not otherwise feel. 

Through building a financial plan, you will understand the sustainability of your income by considering a range of factors, including longevity and inflation. It also allows you to voice concerns, such as how you’d cope if investment performance didn’t meet expectations or you needed care later in life, creating a safety net if necessary. 

A financial plan will consider the assets you want to leave for loved ones

As well as your own financial security, you may want to leave a legacy to your loved ones. Perhaps you worry that depleting assets now will mean you won’t leave an inheritance to your children or grandchildren. 

An LV= survey found 88% of people hope to leave money to their family in their will. A financial planner can help you understand how the value of your assets could change during retirement and how to effectively pass wealth on to the next generation.

Contact us to talk about your retirement goals.

If you are nearing retirement or have already retired, please get in touch. We can work with you to create a financial plan that suits your goals and gives you the confidence to use the assets you’ve built up during your working life. 

Risk warnings

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available. 

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.  

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