Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Welcome to Meron Talks
Speaker 1: Your Money, the personal finance edition of Merin Talks Money
Speaker 1: and these bonus podcasts we talk about the best strategies
Speaker 1: for making the most of your money. I'm Mertin something
Speaker 1: that web and with me, senior reporter of Money Distilled
Speaker 1: author John Staback. Hi, John him. Okay, we have got
Speaker 1: great listeners, and so this week's episode was inspired by
Speaker 1: an email from one of those listeners. So fan of
Speaker 1: the show, Craig, Thank you. Craig wrote in to ask
Speaker 1: about his retirement. He's writing about his own experiences. He's
Speaker 1: worked hard, he's saved, he's planned, he's budgeted, and he has,
Speaker 1: as he puts it, developed frugal skills. Your wartime grandmother
Speaker 1: would have been proud of. Now and I'm still quoting
Speaker 1: Craig here. Now you're suddenly sixty something. You have that
Speaker 1: pesky mortgage paid off and some money put aside, but
Speaker 1: you can't bring yourself to spend it, can't bring yourself
Speaker 1: to splash out on yourself. And the worst is that
Speaker 1: you can't find anything you really need anymore, even want
Speaker 1: that badly. So all that pain, enjoy it accumulating and
Speaker 1: saving through your younger life seems like a waste. Maybe
Speaker 1: you should have just enjoyed your life more then. Oh god,
Speaker 1: this is terrible, Craig. I'm feeling for you here. Your
Speaker 1: kids are grown and settled and working. They don't need
Speaker 1: a financial legacy, tell you what, Craig, But they think
Speaker 1: they do. Enjoy your money, they say, and live your
Speaker 1: life to the full. But the lifelong habits possessed, and
Speaker 1: I can't. Can you help with this dilemma? Well, so
Speaker 1: the first thing to say on this is this brace
Speaker 1: a mixed reaction from the team. So you and I,
Speaker 1: you know, we're getting old. Now we get to immediately
Speaker 1: understand what Craig is talking about. Some of our younger
Speaker 1: production stuff. You know, they're a bit like this, even
Speaker 1: a real problem not knowing how to spend your money.
Speaker 1: But you know, I have been thinking about that's quite
Speaker 1: a lot since we got this email, and you know,
Speaker 1: I really do get it. And we have said on
Speaker 1: this podcast a lot that when you are thinking about
Speaker 1: your spending and your saving, you're trying to find a
Speaker 1: balance between today you and tomorrow you. And you've got
Speaker 1: to find the right balance. Because of course tomorrow you
Speaker 1: might not even exist. Oh, we have no idea. What's
Speaker 1: going to happen between today you and tomorrow you. You've
Speaker 1: got to find the right balance. You've got to live
Speaker 1: now as well as saving to live later. But there's
Speaker 1: more to it than that. There's this idea which again
Speaker 1: we've talked about that pretty much everyone, and even if
Speaker 1: they won't admit it, they have in their head a
Speaker 1: target level of accumulation. I'll be fine when I've got
Speaker 1: a million quid, I'll be fine when I've got one
Speaker 1: and a half. I'll be fine when I've got to
Speaker 1: whatever it is. Everyone has this in their head and
Speaker 1: everyone who is adding out. My house is worth this,
Speaker 1: my pentan is worth this, my savings are worth this,
Speaker 1: et cetera, et cetera. You get there, you get your target,
Speaker 1: and then you have to run down your target. You're
Speaker 1: moving away from something that you spent forty years heading towards.
Speaker 1: That is that's the kind of psychological hell, and at
Speaker 1: the same time you're confronting your own mortality. I've got
Speaker 1: the target, I got to the top. Now I'm on
Speaker 1: the way down. I'm on the way out. And when
Speaker 1: I think about my money and how much there is
Speaker 1: I have to think about how many years I think
Speaker 1: I'm going to live. I mean, I'm done now. I'm
Speaker 1: never retiring. I'm never going to be Craig. I'm just
Speaker 1: going to keep accumulating forever. I can't I can't even
Speaker 1: begin to face the psychological issues that Craig has brought
Speaker 1: up here. Have you been thinking about it like this
Speaker 1: or have you just been, you know, counting your money?
Speaker 2: Those that exactly the things have been thinking about. I mean,
Speaker 2: this is fundamentally a problem with the human condition. It's
Speaker 2: like you may get hit by a bus tomorrow, but
Speaker 2: you might not, and that's the uncertainty that you have
Speaker 2: to live with and plan for. And you don't have
Speaker 2: the number, well, you don't have the key number in
Speaker 2: the equation that you need for absolute certainty, which is
Speaker 2: at what age am I going to die? And the
Speaker 2: problem is, yeah, you do get to the point where
Speaker 2: you know, you'd like to say you've got all your money,
Speaker 2: and at this point that it's been that goal for
Speaker 2: such a long time, and if you are someone who's
Speaker 2: heavily goal orientated, then it's somedingly like, well what do
Speaker 2: I do next? And one other issue I think, and
Speaker 2: I think this afflicts men, or at least full time
Speaker 2: career driven people quite badly. Your goal is okay, let's retire,
Speaker 2: and then your next big goal becomes, well, actually, my
Speaker 2: next big goal is is death. And if you're not careful,
Speaker 2: then you sort of spend your retirement with that sort
Speaker 2: of looming over you. Is almost like it's like, well,
Speaker 2: what am I doing now? And I think that I
Speaker 2: do think that. I mean part of what Craig is
Speaker 2: talking about here and we probably wouldn't discuss this into
Speaker 2: but is what purpose do you replace?
Speaker 1: You know?
Speaker 2: What is your new purpose? How do you keep building?
Speaker 1: Yeah? But is this why so many people are obsessed
Speaker 1: with inheritance tax? Your new goal becomes not paying inheritance tax.
Speaker 1: You know, first you're accumulating and now you've got to
Speaker 1: find something else, something else financial, And it's all about that.
Speaker 1: I don't know anyway. Yeah, everyone needs a target, everyone
Speaker 1: needs an obsession. You know, target driven people are the
Speaker 1: most Well, this is not a self help podcast. We
Speaker 1: keep saying, we get, we get. We have a guest
Speaker 1: coming up, and now he's going to think he's on
Speaker 1: a self help podcast. Georgia, not on a self help podcast. Okay,
Speaker 1: financial podcast. So moving on the key point here being
Speaker 1: there are no pockets in a shroud. So this that's
Speaker 1: a wonderful phrase, doesn't It keeps coming up on this podcast.
Speaker 1: So all this raises some really interesting questions. What is
Speaker 1: the best way to scenario plan for your retirement? How
Speaker 1: can you feel well informed about what you're realistic spending
Speaker 1: limits are. How can you give yourself a spending target
Speaker 1: to work for as opposed to a saving target to
Speaker 1: work towards, particularly if you have spent the last forty
Speaker 1: years aggressively saving, which by the way, is not exactly
Speaker 1: what we would advise on this non self help podcast.
Speaker 1: So to help us talk about that and address some
Speaker 1: of the issues that had been brought up by Greig,
Speaker 1: Thank you again, Craig. We have invited on George who
Speaker 1: as a chartered financial planner and retirement planning a specialists
Speaker 1: firm is called Flying Colors Advice. Welcome George, and thank you.
Speaker 1: Sorry about that lengthy introduction, but do you know I
Speaker 1: was up all night worrying about or having a target anymore?
Speaker 1: As I age, I was.
Speaker 3: Going to say, I absolutely love the introduction. It was
Speaker 3: great and you perfectly articulated what I've heard so many
Speaker 3: times from clients, maybe not said directly. You seem to
Speaker 3: have every detailed kind of work through, but it was
Speaker 3: an amazing intro. So I was nodding my head along
Speaker 3: to it.
Speaker 1: Thinking that's great, thank you.
Speaker 3: First, I just want to acknowledge that, you know, it's
Speaker 3: really difficult to get this right because this is a
Speaker 3: first world problem. But it's a problem nevertheless, and hit
Speaker 3: now on the head where it's as much psychological as
Speaker 3: it is financial. And we're creatures of habit and at
Speaker 3: the end of the day, the same habits that are
Speaker 3: going to make you financially successful are probably going to
Speaker 3: make it quite hard to spend if you are financially successful.
Speaker 3: The vast majority of us, we part of our identity
Speaker 3: is we become accumulators, and that's all well and good,
Speaker 3: But then the problem is what happens when the figures
Speaker 3: are supposed to go down? How exactly do we plan
Speaker 3: for that? I think when I read kind of Craig's question,
Speaker 3: the thing that really struggle me, if I'm being honest,
Speaker 3: is don't we beat ourselves up so much on everything?
Speaker 3: Which is that if it's not crisis because you're not
Speaker 3: saving enough. It's crisis because maybe you've not spent the
Speaker 3: right amount. And this, especially in retirement, this is so challenging.
Speaker 3: You know. William Sharp's a Nobel Prize winner in economics.
Speaker 3: He called turning your lifetime savings into sustainable income the nastiest,
Speaker 3: hardest problem in finance. And the reason he did is because,
Speaker 3: as Johnny said, we don't know how long we're going
Speaker 3: to live. We don't know what inflation is going to be,
Speaker 3: we don't know what market returns are going to be,
Speaker 3: we don't know if we're going to need care, and
Speaker 3: we don't know what the sequence of returns are going
Speaker 3: to be. So all of this kind of adds together.
Speaker 3: But for Craig, you know, I think the thing to
Speaker 3: put himself on the back with is he said, you know,
Speaker 3: kids settled, no mortgage retirement, where it seems like he's
Speaker 3: acknowledging he's got financial security, he has options, and probably
Speaker 3: the first step to resolution might just be taking step
Speaker 3: of stock of what he's achieved first, as opposed to
Speaker 3: looking at the missed opportunity. But there are things we
Speaker 3: can do to address the missed opportunity.
Speaker 1: But as well, when you say the missed opportunity. What
Speaker 1: do you mean the fact that he has possibly oversaved
Speaker 1: and he hasn't. This man has not spent enough time
Speaker 1: in the Maldives in his head.
Speaker 3: Yeah exactly, And I am kind of inferring slightly from
Speaker 3: the question, but I think there's the kind of the end.
Speaker 3: But he says, enjoy your money, live your life to
Speaker 3: the full. Lifelong habits persist and I can't, and he
Speaker 3: kind of the indication is sort of maybe wasted opportunity.
Speaker 3: I think the big thing I'll be saying to him
Speaker 3: as an individual, and then maybe we can kind of
Speaker 3: take some lessons from it, is you are at retirement.
Speaker 3: You're at the ultimate point where you have freedom. And
Speaker 3: sometimes we look at wealth in a really kind of binary,
Speaker 3: singular way we think of money. But in my view,
Speaker 3: and certainly why I encourage my clients, wealth isn't just money.
Speaker 3: It's health, it's relationships, it's purpose, which is what you
Speaker 3: touched upon freedom, it's freedom. Yeah exactly, and he's ticked
Speaker 3: that box. But especially if you ask someone listening who
Speaker 3: is approaching retirement, you need to spend as much time
Speaker 3: thinking about what you're retiring too, as much as you're
Speaker 3: spending time thinking about what you're retiring from. You know
Speaker 3: what happens that first day on perhaps a rainy Tuesday,
Speaker 3: and you're probably listening to this in a very rainy
Speaker 3: January where other people are at work, or maybe you're
Speaker 3: down the golf course and you know, saying the same
Speaker 3: jokes for the fourth time. How are you going to
Speaker 3: fill your calendar so that you can continue to have
Speaker 3: some purpose?
Speaker 1: I suppose you have saying we should say about Craig
Speaker 1: before we move on, that he does seem to have
Speaker 1: a very interesting set up here where his children are
Speaker 1: grown and settled and working and don't need a financial legacy.
Speaker 1: And as I said, I'm sure that they'd appreciate a
Speaker 1: financial legacy, but he's in an interesting position there. I
Speaker 1: think there'd be very few people these days in their
Speaker 1: sixties who could safely say that they felt their children
Speaker 1: were fully financially settled. And spoken to a reasonable number
Speaker 1: of people recently of this sort of age group who
Speaker 1: look around themselves and they see, you know, the value
Speaker 1: of their house, which might have been the thing that
Speaker 1: they intended to leave to their children as their financial legacy,
Speaker 1: that value is falling, particularly if they're and maybe in
Speaker 1: the southeastern and central London, so their mental mind map
Speaker 1: of how much they might have to leave to their
Speaker 1: children is falling. And possibly they're also seeing their own
Speaker 1: children having trouble with cost of living crisis, getting on
Speaker 1: the housing ladder, themselves, financing their children's education, all these things.
Speaker 1: So there is a group of people Craigue is not
Speaker 1: among them, who are suddenly finding in their sixties that
Speaker 1: they have financial pressures they didn't expect. Yeah.
Speaker 3: Absolutely, as far as kind of practical stuff to try
Speaker 3: and address this, and it's so difficult because we can
Speaker 3: never summarize the generation, We can never really generalize. But
Speaker 3: as far as what I do day in day out
Speaker 3: with my clients, the heart of it always has to
Speaker 3: come back to a cash flow plan. So we talked
Speaker 3: about so if you think about on the way up
Speaker 3: you're budgeting, and especially perhaps in your thirties and early forties,
Speaker 3: the reality is you can just go on a mode
Speaker 3: where I just want to accumulate as much as I can.
Speaker 3: You know, the number needs to go up in the
Speaker 3: fastest possible and most tax efficient way. Yeah, but I
Speaker 3: would say when, especially when you start to get towards
Speaker 3: retim start to approach it. That's really where a cash
Speaker 3: flow plan comes in, and professionals like myself, we use
Speaker 3: kind of quite sophisticated modeling software where you can go
Speaker 3: in and actually you can put into the system if
Speaker 3: I wanted to die with zero, how much do I
Speaker 3: need to spend based on these figures, and then I've
Speaker 3: got to spend the rest of the meeting. Go No,
Speaker 3: we're not going to spend that amount, by.
Speaker 1: The way, because it's really racy. But I mean, that
Speaker 1: is the time get right, die broke?
Speaker 3: Is it mere? Though? That's interesting though?
Speaker 1: Is I don't know. I mean, it feels like a
Speaker 1: good target. Then there's no tax to pay. Everything's been
Speaker 1: either given away or spent, and you know, you accumulated
Speaker 1: perfectly and then you decumulated perfectly. So maybe we can
Speaker 1: offer that as a goal to people to get rid
Speaker 1: of their deccumulation anxiety. Make dying broke the goal.
Speaker 3: Yeah, and actually let's dive into that because that actually
Speaker 3: there is some things to talk about, especially when we're
Speaker 3: talking about property and pensions. So I'll kind of dive
Speaker 3: into some kind of legislation. So from twenty twenty seven,
Speaker 3: certain new tax year pensions are going to be inside
Speaker 3: of the estate for inheritance tax, and this has fundamental
Speaker 3: for my clients who have a bit more money. This
Speaker 3: has completely changed the cash flow plan entirely. So just
Speaker 3: to recap on the rules, Basically, this is not including
Speaker 3: defined benefit pensions because they generally die either with you
Speaker 3: or they die after your your spouse or civil partner
Speaker 3: passes away. This is specifically around flexible pensions where you
Speaker 3: have a pot Now current rules tho these were actually
Speaker 3: very tax efficient legacy vehicles because effectively, post of twenty fifteen,
Speaker 3: you could leave them outside of the estate and it
Speaker 3: meant that, okay, if I don't spend my pension, it's
Speaker 3: an incredible legacy option. Because at the moment nil rate
Speaker 3: bands are three hundred and twenty five thousand pound per individual.
Speaker 3: You also have what's called the main residence nil rate band,
Speaker 3: and this effectively means that a single person it's up
Speaker 3: to five hundred thousand. If you're married civil partner, it
Speaker 3: can be potentially up to a million. Now, pensions are
Speaker 3: going to get dragged into the estate from twenty twenty seven.
Speaker 3: And it's not just that there's a cliff edge around it.
Speaker 3: This is assuming you've got a flexible pot, so not
Speaker 3: a defined benefit pension. And if you die after seventy five,
Speaker 3: not only will that be inside of your estate after
Speaker 3: you and your spouse die, assuming you leave it to
Speaker 3: your spouse, but also if you die after seventy five,
Speaker 3: it's taxable at the beneficiary's marginal rate. Now, let's say
Speaker 3: you are based in the South, and let's just say
Speaker 3: your house is worth over a million, which is a
Speaker 3: substantial amount of money. But let's just say that is
Speaker 3: the case. You've also got then your pension part and
Speaker 3: you don't know how long you're gonna live. The problem
Speaker 3: is if your pension is inheritance tax eligible, that means
Speaker 3: they will lose forty percent inheritance tax. And then, in
Speaker 3: like Craig's example, if the kids are settled, perhaps they're
Speaker 3: higher rates then post seventy five, if they then try
Speaker 3: and draw out the pension they've inherited, they've not only
Speaker 3: paid forty percent inheritance tax, but then they might pay
Speaker 3: an extra forty percent if they're higher rate and we're drawing,
Speaker 3: so the tax rate for them would actually be sixty
Speaker 3: four percent when you work it out, forty and then
Speaker 3: forty percent of the residual. So what does that mean? Well,
Speaker 3: going back to Craig's position, we do need to kind
Speaker 3: of reframe it is that if you are affected by that,
Speaker 3: you might not be wanting to spend as much. But
Speaker 3: how do we feel about legacy, how do we feel
Speaker 3: about inheritance tax planning? And sometimes that can get them
Speaker 3: off of the fence a little bit towards action.
Speaker 1: Yeah, so you need basically you need to spend all
Speaker 1: the money inside that pension rapper shearpish to avoid your
Speaker 1: airs having to spend having to pay sixty four percent
Speaker 1: taxation on it. So that's quite a quite a driver
Speaker 1: for Craig.
Speaker 3: Yeah. I think the other thing I think was interesting
Speaker 3: about Craig's comment as well, as he says, what was it?
Speaker 3: I don't want to splash out on mess yourself? So
Speaker 3: nothing to splash out on yourself? The thing I would
Speaker 3: push back if he was a client, I would say,
Speaker 3: what do you mean by that splash out on yourself?
Speaker 3: You know what do you mean by that?
Speaker 1: Is that?
Speaker 3: Is there anything that you're not spending on? Is there
Speaker 3: anything you want to do kind of intentional? Because we
Speaker 3: do have this, you know, this mindset sometimes where no
Speaker 3: one wants to be seen as extravagant. But a pound
Speaker 3: when you are sixty or fifty five it has a
Speaker 3: different utility to a pound when you are eighty five ninety.
Speaker 3: I'm not saying all eighty five year olds don't spend anything.
Speaker 3: I'm saying, no one's promised tomorrow. And you know we
Speaker 3: can't be guaranteed to be going down the ski slopes
Speaker 3: at eighty five. I think that's a fair thing to say.
Speaker 1: I wants to climb killim and Jarrow. He needs to
Speaker 1: get moving.
Speaker 3: Yes, exactly, exactly, And a good financial planner should be
Speaker 3: always encouraging someone to spend their money purposely for today.
Speaker 3: It's not about being wasteful, but it's about going right.
Speaker 3: We've got a cash flow plan. How are you making
Speaker 3: the best use of the money. And I'm quite proud
Speaker 3: to say that quite a lot of my meetings with
Speaker 3: clients I will be saying, look, we can spend a
Speaker 3: bit more. Is there anything you've not done? Is there
Speaker 3: anything you would regret not doing? Because we all live
Speaker 3: our lives a bit on autopilot, don't we, and especially
Speaker 3: if we're used to accumulating, sometimes you need a bit
Speaker 3: of permission to go on the holiday or go business?
Speaker 1: Oh, good business.
Speaker 2: Now these are really tough questions, Lord, which I think
Speaker 2: is sort of getting to the other if you like
Speaker 2: the psychological point. But Krieg is time. But is there
Speaker 2: any advice that you give to people who are sort
Speaker 2: of like certainly they're saying, well, asley, I don't know
Speaker 2: what I want to do. And I think this is
Speaker 2: probably something that hits maybe in the like very early
Speaker 2: retirement rather than you know, once they've got used to it.
Speaker 2: But that is just part of that big kind of
Speaker 2: shift and suddenly thinking I said, what is the point?
Speaker 2: What am I doing here? And then you've got the
Speaker 2: risk that you sit there and think, well, actually, that
Speaker 2: hobby that I spent ages saying I was going to
Speaker 2: spend you know, the rest of my life in the
Speaker 2: golf course, I don't actually fancy that anymore. Is there
Speaker 2: anything you have a turn around to people and say, well, look,
Speaker 2: I don't know, like you know, take a holiday for
Speaker 2: a fortnight and just you know, like think about this problem.
Speaker 2: I mean, if you get any sort of suggestions for
Speaker 2: that early point after retirement and how you can sort
Speaker 2: of ease yourself gently into that. It's just because change
Speaker 2: is traumatic it's like, how do people take time out
Speaker 2: from that?
Speaker 3: Yeah, this is a really good question, and the truth
Speaker 3: is the best time to think about this is before
Speaker 3: you retire, not on the day of retirement. There's going
Speaker 3: to be so much that will change at that point,
Speaker 3: you'll have that identity shift that like anything, if you're
Speaker 3: going to make a big change, the best thing to
Speaker 3: do is to ease yourself into it. And that doesn't
Speaker 3: necessarily mean continue working, although sometimes part time work can
Speaker 3: be a really good way to ease your way into it.
Speaker 3: But you should be looking at your calendar and thinking,
Speaker 3: how where am I going to get the purpose that
Speaker 3: I had from work? Where I'm I going to get
Speaker 3: the engagement? If we go to the gym to keep
Speaker 3: ourselves physically fit, how am I going to remain mentally
Speaker 3: strong and resilient and make sure that I've got things
Speaker 3: to fill my time. So absolutely answer your question, John,
Speaker 3: I am speaking with my clients and saying, okay, so
Speaker 3: what are you retiring to you know, tell me about
Speaker 3: your weekend, you know, tell me about what you're going
Speaker 3: to be doing to fill your time. Now, for those
Speaker 3: that are highly engaged, they will list tons of stuff
Speaker 3: around the house hobbies, you know, things are going to do, volunteering.
Speaker 3: Often it tends to come with maybe perhaps a bit
Speaker 3: of extra family support they've got grand kids on the
Speaker 3: way or something along those lines. And that's always great
Speaker 3: to hear the people who I worry about, and I
Speaker 3: always push back and just say, look, I think you
Speaker 3: really need to think about this is the kind of
Speaker 3: the perhaps the one who's been the big as the executive,
Speaker 3: who has maybe not had time or the inclination to
Speaker 3: think about it. Maybe, if I'm being honest, it's something
Speaker 3: they don't really want to think about because they've got
Speaker 3: a lot of their identity from what they're doing in work,
Speaker 3: and it's so individual, so it's difficult for me to
Speaker 3: take a sweeping statement. But I would often push back
Speaker 3: in those conversations and say, are you sure you've got
Speaker 3: enough to you know, to really enjoy your retirement, because
Speaker 3: the truth is there are some who regret retiring, and
Speaker 3: we don't want that as a planner. I don't want
Speaker 3: to see that. I don't want to see you, you know,
Speaker 3: a couple of times a year looking more miserable every
Speaker 3: time I see you.
Speaker 1: Isn't that what charity boards afore George, Yeah, exactly, exactly. Yeah,
Speaker 1: half the charities in the world exist to give retired
Speaker 1: people something to do.
Speaker 3: Yeah, well, there is that, There is that, But I
Speaker 3: think it comes down to intentionality. If you think about
Speaker 3: retirement being you know, it's not a one off thing.
Speaker 3: There is no way that we would plan for something
Speaker 3: as big in our life without or we would go
Speaker 3: into something as big without a really well thought out plan.
Speaker 3: And sometimes I think we feel like retirement is just
Speaker 3: this thing that happens that you just disappear off into
Speaker 3: the sunset. It's not. It's a phase of life. It's
Speaker 3: the third act, and we need to make sure that
Speaker 3: it's actually worth all the things that you've sacrificed for.
Speaker 1: I can't tell you how anxious I am now feeling, George,
Speaker 1: I don't know, so terrified of the idea of retirement
Speaker 1: looming in a decade or something. To sit down and
Speaker 1: make plans. I've got to make some lists of so
Speaker 1: much stuff I've got to do in preparation for this.
Speaker 1: But let's go back to making an actual plan. How
Speaker 1: do we sit down and figure out how much we
Speaker 1: should be spending. I'm using the word should quite carefully here.
Speaker 1: What does Craig do, Now, how does he sit down
Speaker 1: and find out what he actually should be spending?
Speaker 3: Yeah, and it would be very self interested me saying,
Speaker 3: work with a financial planner. But this is generally absolutely
Speaker 3: called George. Yeah, this is we have a lot of
Speaker 3: value because it is what we do day in day out.
Speaker 3: But even if you don't, I think unless you are
Speaker 3: just that person who has just a define benefit scheme
Speaker 3: and it meets your needs and then it will get
Speaker 3: topped up from your state pension, the vast majority of
Speaker 3: the scheme, Yeah, the vast majority of us have all
Speaker 3: these moving parts we've got to consider. And also your
Speaker 3: spending will change, your family needs will change. Maybe you
Speaker 3: want a gift part for a house deposit for the kids.
Speaker 3: There's so many moving parts. I think you're going to
Speaker 3: need to construct some sort of financial plan. Perhaps maybe
Speaker 3: in the show notes if you allow as we can
Speaker 3: put some links to some resources. A financial plan is
Speaker 3: better than none. And what your effects are going to
Speaker 3: need to do is you're going to need to look
Speaker 3: at your different income sources. So we know that you'll
Speaker 3: have your state pension. You should check if you're entitled
Speaker 3: to a full state pension. So go on check state
Speaker 3: pension forecast, to check your national insurance record, and then
Speaker 3: we need to really get intentional about your pension planning.
Speaker 3: So have you got to find benefit schemes, when do
Speaker 3: they kick in? What's the impact if you take them earlier?
Speaker 3: And you can ask the schemes for things like that,
Speaker 3: what are your underlying investments with the pensions? What are
Speaker 3: your pensions? And isis which are you going to draw
Speaker 3: down bit by bit. One of the things I'm doing
Speaker 3: for my kind of clients with a little bit more
Speaker 3: money is actually we're being much more thoughtful in relation
Speaker 3: to doing things like when they come to retire, maybe
Speaker 3: even using their full basic rate band, because if they're
Speaker 3: using their full basic rate band, actually when you compare
Speaker 3: it to that potential sixty four percent tax example I
Speaker 3: gave for the legacy, you know it actually can be
Speaker 3: worthwhile doing that. So it's about looking at your assets
Speaker 3: and the income streams they can or are potentially going
Speaker 3: to provide you in retirement. Some people will being draw
Speaker 3: down where you're drawing down the pot bit by bit.
Speaker 3: The areas you have to watch out for there is
Speaker 3: there is a specific risk in retirement called sequence risk.
Speaker 3: If you're entirely a reliant on your pension pot. That is,
Speaker 3: it's not just the returns you get over retirement, it's
Speaker 3: the order of returns that can have a substantial difference.
Speaker 3: If you're that unfortunate person who retires in the nineteen
Speaker 3: seventies when we went through the stagflationary period or two
Speaker 3: thousand and nine, you're going to be in a difficult
Speaker 3: position because you are drawing down on your pot when
Speaker 3: the markets are down. So you need to have a
Speaker 3: look at your expenditure, which is your your life, the
Speaker 3: cost of your lifestyle. Make sure you increase it with inflation.
Speaker 3: Don't forget about inflation. I've seen some DIY cashplow plans
Speaker 3: where people don't include inflation it all. You know, half
Speaker 3: your spending power over your retirement inflation, so make sure
Speaker 3: we factor that in charges and so forth. I know
Speaker 3: that sounds like a lot, It sounds overwhelming. There are
Speaker 3: templates that can help you start, and you'll have time. Yeah,
Speaker 3: well do it before, do it before. This is the
Speaker 3: working activity, I would say, just because going back to
Speaker 3: Craig's point actually on that it's insightful to do it
Speaker 3: earlier anyway, because let's say Craig had done this ten
Speaker 3: years ago and he'd actually realized, do you know what,
Speaker 3: I think I've got enough? What happens if he had
Speaker 3: then decided, actually, I'm going to go part time or
Speaker 3: I'm gonna maybe go on a few more holidays. Wouldn't
Speaker 3: that be a great result of someone listening to this
Speaker 3: podcast if they actually ended up living a bit more
Speaker 3: intentionally today as well. So I don't think there's a
Speaker 3: there's a point that you can be looking at a
Speaker 3: cash flow plan for yourself too early. That how much
Speaker 3: you need one depends on how complex your finances are.
Speaker 3: I would kind of say similar to it's important to
Speaker 3: have a budget if you don't have a good handle
Speaker 3: of your finances. If you have more complex finances, it's
Speaker 3: good to have a cash flow plan because it's going
Speaker 3: to need that extra level of kind of scrutiny and check.
Speaker 3: But yeah, that's what professionals do, and you can certainly
Speaker 3: emulate it to a degree yourself, which will give you
Speaker 3: a lot of clarity.
Speaker 1: Let me ask you both a question, John, I really
Speaker 1: want your input on this one. So Craig is having
Speaker 1: trouble spending, maybe a lot of people Craig's Egg are
Speaker 1: having trouble spending, but is there a moral imperative for
Speaker 1: them to get out and spend You know, here we
Speaker 1: are with a sort of stagnating economy. Pubs are in trouble,
Speaker 1: restaurants are in trouble. All kinds of hospitality are in trouble. Craig,
Speaker 1: get out there, have dinner out two or three times
Speaker 1: a week, get down the pub, take a taxi home.
Speaker 1: Help us all out here. It's been not a moral
Speaker 1: imperative for people who have the money at this age
Speaker 1: to get out there and spend it. His children's jobs
Speaker 1: depend on somebody creating activity and economy. Is that fair, John?
Speaker 1: I mean I like that approach.
Speaker 2: I think definitely. Part of the problem is if you've
Speaker 2: got a saving mindset, then it can some they can
Speaker 2: somethings feel moralistic and that, oh, you're squandering money. So
Speaker 2: flipping that around and saying actly, no, you should be
Speaker 2: supporting your local cafe, you should be supporting your local
Speaker 2: taxi company. Yeah, I think that makes a lot of sense.
Speaker 2: And also, at the end of the day, if it
Speaker 2: helps you feel better, I'll be going out and spending
Speaker 2: your money. Then that is quite a nice way to
Speaker 2: reframe it. You know, there's a mischief to it, but
Speaker 2: it's but yeah, if it helps, that's a good way
Speaker 2: to think about it.
Speaker 1: Maybe this is a self help podcast. I don't know, George,
Speaker 1: what do you think is there a moral imperative for
Speaker 1: all the people with money to get out of there
Speaker 1: and have lunch? And by the way, do not take
Speaker 1: weight loss jabs because if you take weight loss jabs,
Speaker 1: you will not be spending enough money in the pub.
Speaker 1: Down with weight loss jabs, up with going out for
Speaker 1: dinner and drinking. Yeah.
Speaker 3: I don't know about the moral stuff. I think I
Speaker 3: think it's a nice add on. I would definitely say yeah,
Speaker 3: why not because it gets the economy going and if
Speaker 3: that gives you a push, then amazing. But the phrase
Speaker 3: expect to give with a warm hand and a cold
Speaker 3: is probably also true. You know, if there's a way
Speaker 3: that you want to start giving your money while you
Speaker 3: can get to see it again, no one's getting out
Speaker 3: of this alive, so yeah, go for it if you've
Speaker 3: got the money.
Speaker 2: Defintely, the gifting there's an interesting one because there's always
Speaker 2: there's always something that's needed, and if it's you know,
Speaker 2: an entity if it's something like school fees or starting
Speaker 2: a pension for you know, maybe your grind kids, that
Speaker 2: kind of thing. You know that there is always stuff
Speaker 2: that you can do. So I think yes, the model
Speaker 2: imperative to spend is good as well.
Speaker 1: Though, yeah, less worthy, but pretty good, right. I am
Speaker 1: changing our key phrase on this from no pocket center
Speaker 1: shroud to no one is getting out of this alive.
Speaker 1: Thanks for that, George, you will. Thank you very much
Speaker 1: for coming on today. Thanks for listening to this week's
Speaker 1: Merin Talks to Your Money. If you like our show,
Speaker 1: rate review, and subscribe wherever you listen to podcast. Also
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Speaker 1: at marinas w and John Underscore Stepping. This episode was
Speaker 1: produced by Samasadi and Moses and Question. The comments on
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Speaker 1: show email is Merrior Money at Bloomberg dot net