Many people intend to work beyond the age of 65 in the belief that this will provide the financial stability needed for a comfortable retirement. Working longer may be a financial necessity, however, relying solely on the hope of being able to extend your working years can be a risky strategy. Various factors beyond your control: physical or mental health issues, the needs of a spouse or partner, or changes in employment circumstances, can abruptly alter your retirement timeline.
This article explores why planning to work until 70 is uncertain and outlines actionable steps you can take now to secure your financial future.
The Uncertainty of Working Longer
While many see themselves working well into their late 60s or early 70s, several unpredictable factors can thwart these plans. Physical or mental health issues are among the most common reasons why individuals may need to retire earlier than expected. According to Age UK, nearly half of people in their early 60s are not working due to health issues or disability.
Additionally, your partner’s health and preferences can also influence your retirement timing. If your spouse or partner needs care or simply wishes to spend more time together, this could necessitate an earlier retirement.
We tend to think that bad things happen only to others but, unfortunately, there are too many stories of retirement dreams being lost to physical or mental complications to assume it won’t happen to you. Anyone who has experienced life-limiting illnesses will tell you working longer wasn’t worth it; I’m yet to meet anyone who died wishing they spent more time in the office.
Employers’ decisions can also play a significant role; corporate restructuring, redundancy, or mandatory retirement policies can force you out of the workforce earlier than anticipated.
Taking Control of Your Financial Future
While you may not control your health or employment status, you can control your financial decisions and actions leading up to retirement. By making prudent financial choices now, you can ensure that you retire on your terms. Here are some actions you can take to prepare for a secure and fulfilling retirement.
1. Set Clear Priorities
The first step is to define what a meaningful retirement looks like for you. This could involve travel, spending time with family, or engaging in hobbies. Once you have a clear vision, prioritise your financial goals accordingly. If enjoying a full and meaningful retirement is your primary goal, it may be necessary to prioritise saving over current spending.
2. Increase Retirement Savings
Boosting your retirement savings is crucial. Take advantage of workplace pension schemes, especially if your employer offers matching contributions. Additionally, consider setting up a personal pension plan or contributing to an ISA (Individual Savings Account) to increase your retirement nest egg. Making sure you have enough savings provides an essential buffer against the unexpected.
3. Diversify Your Investments
Diversifying your investment portfolio can provide more stability and growth potential. Consider a mix of shares and bonds invested globally to spread risk. Consulting with a financial adviser can help tailor an investment strategy that aligns with your retirement goals and risk tolerance.
4. Pay Off Debts
Entering retirement with minimal debt can significantly reduce financial stress. Focus on paying off high-interest debts first, such as credit cards or personal loans. If possible, aim to pay off your mortgage before retiring, as this can free up a substantial portion of your retirement income.
5. Plan for Healthcare Costs
Healthcare can be a significant expense in retirement and with NHS waiting times staying high getting seen quickly may need private medical treatment. Health insurance policies, while being more expensive as you age, are something to consider and plan for in your budgeting. Additionally, setting aside a portion of your savings specifically for medical expenses can provide peace of mind.
6. Review Your Will & Set up Powers of Attorney.
Ensure that your will is up to date and reflects your current wishes. Establishing powers of attorney for financial and health matters can ensure that your affairs are managed according to your preferences if you become unable to do so.
7. Stay Informed
Keep abreast of changes in pension laws, tax regulations, and investment opportunities. Regularly reviewing your retirement plan with a financial advisor can help you make necessary adjustments and stay on track to meet your goals.
8. Consider Phased Retirement
If you enjoy your work and wish to continue beyond the traditional retirement age, consider a phased retirement. This might involve reducing your hours or shifting to a less demanding role, allowing you to gradually transition into full retirement while still earning an income.
Relying on the hope of working until 70 is fraught with uncertainties. While health issues, employer decisions, and personal circumstances can derail such plans, taking proactive steps now can secure your financial future. By setting clear priorities, increasing savings, diversifying investments, paying off debts, planning for healthcare costs, reviewing your estate plan, staying informed, and considering phased retirement, you can retire on your terms.
The one thing you can control is your financial preparation; start planning today to ensure a fulfilling and financially secure retirement. This article helps you work out how much is enough for you to retire on your terms.
