The glorious golden years... you hope?
All very different
So, this is an interesting one! Not because of the financial topic, but because everyone is different and after a working lifetime, the outcome of their financial planning, good or bad, is also very different. Variety is the ‘spice of life’ as they say!
Some individuals may still be working because they have to, some might be because they love what they do, some might be earning on a part-time basis, some might be just retired, just relying on the State Pension which has just arrived, or long retired and enjoying every minute... you can guess this list has as many variants as you can think of - and of course each with a different cost!
The way funds are used
Many look at what they have accumulated, usually from a few sources reflecting their varied career path, and everyone will have different capital and income levels which start to dictate the way they live and enjoy their golden years. But of course there are other factors, such as health and family, which will also influence financial planning and the way funds are used.
However, before we go on to these influences, some of the basics of financial planning still stand, such as maintaining an emergency deposit fund of 3-6 months’ income for unforeseen circumstances, possibly now both for you and for other family members. If you have a spouse or partner and have savings that generate returns, either interest or dividends as an example, you might want to shelter these savings using ISA allowances or nil rate income tax bands (currently up to £11,850 gross) for each of you.
You might also be able to top up your State Pension before you draw it, so again it’s worth a check to see if there is an opportunity available and if it offers you value.
What other financial planning issues might you want to think about?
Making a Will and ensuring it’s up to date
Making a Will is probably not the most pleasant of administration points to consider, but it is probably one of the most important. Letting a family member know where this is held is also very helpful and I have noted this further below. If you have a partner, knowing where their Will is kept is important and knowing what’s in it is also usually worthwhile, especially if there are children from a previous relationship.
Also, thinking about establishing Power of Attorney arrangements.
There are currently two sorts - one for health and one for wealth, so take some legal advice on what you should need and get this planning sorted whilst you are still fit and able.
This can be an emotional issue for many, having had your hard earned money gone through the tax system to be taxed again on your death, usually at 40%. There are a few allowances that can be used, such as the annual gift allowance of £3,000 and in some cases the surplus income rule which can be an efficient way of placing funds outside the estate for inheritance tax purposes. Care needs to be taken here, because many people are living longer and sometimes the needs of the family can appear to be greater than those of the individual. It is important to bear in mind that the significant costs of long term care may need to be catered for.
Long Term Care
As a guide, The Money Advice Service (2020) suggests that average care costs in the UK are around £39,000 in a care home, to £55,000 per year if nursing care is required. SaidSo offers service across the UK and if we concentrate on the word ‘average’, you can guess costs vary dependent on where you are located. Eye-watering annual costs, I am sure you would agree, and something that needs to be carefully considered, especially when you are thinking of gifting any funds away to the family.
Medical costs & insurance
Invariably, the premiums for cover don’t get cheaper as you get older. Those who have saved a lot of money during their lifetime might think about ‘self-insurance’, effectively earmarking their capital for future medical costs. Others may have no cover, and others may have plans that continued on from their last employment. This is just an example of an additional financial issue that may need to be considered in later life.
What does enjoyment look like to you?
We hope that you spend these years gallivanting around at a fair pace, enjoying yourself with the people you want to be with and achieving experiences that you may have spent years waiting for. The ones that love you might be pleased to know that you are happy, but make sure you leave someone you trust with detailed notes of where everything is lodged/held/filed, just in case something goes wrong and they have to pick up the pieces. Sounds a bit finite, but in our experience, many relatives are pleased to be trusted as a future guardian.
Now, the most important point (and one we can’t help you with) is how you enjoy yourselves in these latter years! That’s down to you and your circumstances and again, each to their own on what enjoyment looks like. But knowing that your money planning is in order might just give you the peace of mind to enjoy yourself more, with everything planned, detailed and where you want it.
The points above are not an exhaustive list, but they do give some guidance on important issues for consideration and also an indication of their interaction.
We hope you have been inspired to take action for your financial planning from the notes above. This SaidSo free guide is for guidance only.