Approaching Retirement

[updated June 2020]

The 5 years approaching retirement is a period of planning and consolidation. Here we examine a few points which should be considered in the lead up to your chosen retirement age.

Sources of Income

Whilst earned income stops at retirement. By the time you reach retirement, you should have developed multiple potential sources of income. The common ones are interest, rental income and dividend income.

During your working life, you will probably have the income from these sources set to be reinvested. This is because you will have been using earned income to meet your expenses. Approaching retirement, this is likely to change. For most people, loss of earned income results in a drop in total income, even when these dormant income sources are switched on.

In April 2018, the  UK Office for National Statistics recorded the average UK income to be £28,677 a year. However, this was for the whole of the working population. Older workers, those approaching retirement, tend to have higher incomes.

Boosting Your Income

Many people do not want to fully retire. They want to have an active role which also generates some income but without the pressure of a stressful executive job. Taking on part-time work can boost your income and help with the transition between fully employed working 40+ hours a week and full retirement.

Changing Expenses

The other half of the equation is expenses. Those who are used to monitoring their income and expenses will have a much better idea of where the money is going and the cost of their standard of living. Approaching retirement, paying close attention to what is spent where is important. Some expenses will stop when you no longer have to work but others will increase and new ones will appear as you have more leisure time. Contact me for a free budget spreadsheet.

Where Will You Live

One of the biggest influences on your cost of living is where you live. Your retirement location or locations will also have an impact on what currency you have been saving. You may want to spend some time travelling or be a ‘swallow’ travelling South for the winter to a warmer climate.

Who Will You Want To Be Near

As we get older being close to friends, family and healthcare facilities become more important. If you have children or grandchildren, you may wish to be close to them.

Cost of Healthcare

Wherever you choose to retire, it is important to consider the cost of healthcare or insurance for medical expenses. Outside of your home country this is likely to be a considerable expense and should be planned for.

Changing Investment Strategy

When retirement is within 5 years, your strategy will probably switch from growth seeking to consolidation and protection of the portfolio you have built over your working life. This is because there is less time to make up any losses before you want to start living off of the proceeds of your portfolio.

Your portfolio will move to lower risk investments such as cash and some fixed income securities and less will be invested in equities.

What Should I Do Next?

Please contact us for more information on approaching retirement.


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