It is said that retirement is not a natural progression in life. Going to school, studying, starting a career, even getting married and buying a house all seems to be part of an organic change in life but ending ones career is not so. Retirement has only been around the last 130 years and is the start of a new chapter in the retiree’s life. It does take a mind shift, an adjustment to this new season.
But what if retirement is better than your working career? What if by setting new goals and shifting existing ones, retirement is the best season in your life?
One of the biggest fears clients have as they approach retirement is: what if I do not have enough money? What if I have saved my entire career and it is not enough?
One such client came to me at age 64. He planned to retire at 65 as it was the retirement age set by his employer. After doing a full needs analysis, taking into account his risk profile, life expectancy, capital expenditure and income he required, it became apparent that he could not retire at age 65. If he were to retire at 65 he would not be able to draw the income he required or if he did, he would run the risk of running out of capital. Even though this client had been faithfully saving for his entire working career, he had been invested in cash and bonds for the preceding 7 years of his working career and had missed all of the returns on the stock market, giving him every little growth in his retirement portfolio.
We discussed some options available to him and he was fortunate to be able to consult back into the workplace. As he was required to retire by his employer at age 65, we had no choice but to retire and he draw the lowest income from his living annuity. We invested his retirement capital in a goal directed investment, designed for his needs, risk appetite and life expectancy.
A few years later, my client is now able to retire, drawing the income he needs, taking into account any capital drawings he may require. We meet annually for his financial review and even though he can now retire, he is reluctant to do so. He says it’s because he loves the work he is doing. He can choose the projects he wants to get involved in, choose his own working hours, missing most of the traffic and he can chose when he wants to go away on holiday. His new career has given him purpose and meaning.
At Quintus Wealth we believe in educating our clients. We believe by educating our clients they can make informed decisions and understand the market. Investor behaviour is fueled by fear and greed and by educating our clients we can make decisions based on risk and return versus fear and greed.
Educating clients on retirement is the next step in bringing real solutions to our clients. We plan to have a retirement event in the Southern suburbs, so please watch this space.
Sigrid Madonko
Certified Financial Planner ®
Professional Director at Quintus Wealth
info@quintuswealth.co.za