WEBVTT - You’ve Spent Your Life Saving. Now Learn How to Spend 0:00:02.720 --> 0:00:18.959 Bloomberg Audio Studios, podcasts, radio news. Welcome to Meron Talks 0:00:19.000 --> 0:00:22.440 Your Money, the personal finance edition of Merin Talks Money 0:00:22.440 --> 0:00:25.120 and these bonus podcasts we talk about the best strategies 0:00:25.120 --> 0:00:27.760 for making the most of your money. I'm Mertin something 0:00:27.840 --> 0:00:30.080 that web and with me, senior reporter of Money Distilled 0:00:30.080 --> 0:00:38.840 author John Staback. Hi, John him. Okay, we have got 0:00:38.880 --> 0:00:41.919 great listeners, and so this week's episode was inspired by 0:00:41.920 --> 0:00:45.239 an email from one of those listeners. So fan of 0:00:45.280 --> 0:00:47.800 the show, Craig, Thank you. Craig wrote in to ask 0:00:47.880 --> 0:00:51.040 about his retirement. He's writing about his own experiences. He's 0:00:51.080 --> 0:00:54.400 worked hard, he's saved, he's planned, he's budgeted, and he has, 0:00:54.440 --> 0:00:58.560 as he puts it, developed frugal skills. Your wartime grandmother 0:00:58.560 --> 0:01:00.840 would have been proud of. Now and I'm still quoting 0:01:00.880 --> 0:01:03.480 Craig here. Now you're suddenly sixty something. You have that 0:01:03.560 --> 0:01:05.880 pesky mortgage paid off and some money put aside, but 0:01:05.959 --> 0:01:08.880 you can't bring yourself to spend it, can't bring yourself 0:01:08.880 --> 0:01:11.280 to splash out on yourself. And the worst is that 0:01:11.319 --> 0:01:14.280 you can't find anything you really need anymore, even want 0:01:14.319 --> 0:01:18.360 that badly. So all that pain, enjoy it accumulating and 0:01:18.440 --> 0:01:21.479 saving through your younger life seems like a waste. Maybe 0:01:21.520 --> 0:01:24.240 you should have just enjoyed your life more then. Oh god, 0:01:24.280 --> 0:01:26.680 this is terrible, Craig. I'm feeling for you here. Your 0:01:26.760 --> 0:01:29.240 kids are grown and settled and working. They don't need 0:01:29.280 --> 0:01:32.200 a financial legacy, tell you what, Craig, But they think 0:01:32.240 --> 0:01:34.640 they do. Enjoy your money, they say, and live your 0:01:34.640 --> 0:01:37.440 life to the full. But the lifelong habits possessed, and 0:01:37.840 --> 0:01:42.880 I can't. Can you help with this dilemma? Well, so 0:01:43.200 --> 0:01:45.000 the first thing to say on this is this brace 0:01:45.120 --> 0:01:47.480 a mixed reaction from the team. So you and I, 0:01:47.560 --> 0:01:49.400 you know, we're getting old. Now we get to immediately 0:01:49.480 --> 0:01:52.200 understand what Craig is talking about. Some of our younger 0:01:52.240 --> 0:01:55.280 production stuff. You know, they're a bit like this, even 0:01:55.320 --> 0:01:57.520 a real problem not knowing how to spend your money. 0:01:57.800 --> 0:02:00.400 But you know, I have been thinking about that's quite 0:02:00.400 --> 0:02:03.960 a lot since we got this email, and you know, 0:02:04.040 --> 0:02:07.080 I really do get it. And we have said on 0:02:07.120 --> 0:02:11.120 this podcast a lot that when you are thinking about 0:02:11.120 --> 0:02:13.560 your spending and your saving, you're trying to find a 0:02:13.600 --> 0:02:17.360 balance between today you and tomorrow you. And you've got 0:02:17.360 --> 0:02:19.920 to find the right balance. Because of course tomorrow you 0:02:20.000 --> 0:02:22.000 might not even exist. Oh, we have no idea. What's 0:02:22.000 --> 0:02:24.000 going to happen between today you and tomorrow you. You've 0:02:24.000 --> 0:02:25.600 got to find the right balance. You've got to live 0:02:25.680 --> 0:02:29.079 now as well as saving to live later. But there's 0:02:29.600 --> 0:02:33.160 more to it than that. There's this idea which again 0:02:33.200 --> 0:02:35.600 we've talked about that pretty much everyone, and even if 0:02:35.600 --> 0:02:38.880 they won't admit it, they have in their head a 0:02:39.400 --> 0:02:43.600 target level of accumulation. I'll be fine when I've got 0:02:43.600 --> 0:02:45.960 a million quid, I'll be fine when I've got one 0:02:46.000 --> 0:02:48.120 and a half. I'll be fine when I've got to 0:02:48.280 --> 0:02:51.200 whatever it is. Everyone has this in their head and 0:02:51.200 --> 0:02:52.959 everyone who is adding out. My house is worth this, 0:02:53.120 --> 0:02:54.920 my pentan is worth this, my savings are worth this, 0:02:55.000 --> 0:02:59.120 et cetera, et cetera. You get there, you get your target, 0:03:00.160 --> 0:03:03.200 and then you have to run down your target. You're 0:03:03.240 --> 0:03:07.240 moving away from something that you spent forty years heading towards. 0:03:07.240 --> 0:03:11.040 That is that's the kind of psychological hell, and at 0:03:11.040 --> 0:03:16.840 the same time you're confronting your own mortality. I've got 0:03:16.840 --> 0:03:19.840 the target, I got to the top. Now I'm on 0:03:19.880 --> 0:03:22.520 the way down. I'm on the way out. And when 0:03:22.520 --> 0:03:25.800 I think about my money and how much there is 0:03:26.160 --> 0:03:28.799 I have to think about how many years I think 0:03:28.880 --> 0:03:33.000 I'm going to live. I mean, I'm done now. I'm 0:03:33.120 --> 0:03:35.320 never retiring. I'm never going to be Craig. I'm just 0:03:35.360 --> 0:03:38.280 going to keep accumulating forever. I can't I can't even 0:03:38.400 --> 0:03:42.120 begin to face the psychological issues that Craig has brought 0:03:42.200 --> 0:03:44.280 up here. Have you been thinking about it like this 0:03:44.520 --> 0:03:46.960 or have you just been, you know, counting your money? 0:03:47.440 --> 0:03:49.640 Those that exactly the things have been thinking about. I mean, 0:03:49.680 --> 0:03:52.680 this is fundamentally a problem with the human condition. It's 0:03:52.800 --> 0:03:54.960 like you may get hit by a bus tomorrow, but 0:03:55.080 --> 0:03:58.040 you might not, and that's the uncertainty that you have 0:03:58.120 --> 0:04:01.440 to live with and plan for. And you don't have 0:04:01.520 --> 0:04:03.520 the number, well, you don't have the key number in 0:04:03.560 --> 0:04:06.920 the equation that you need for absolute certainty, which is 0:04:07.000 --> 0:04:09.680 at what age am I going to die? And the 0:04:09.680 --> 0:04:12.320 problem is, yeah, you do get to the point where 0:04:12.720 --> 0:04:14.960 you know, you'd like to say you've got all your money, 0:04:15.000 --> 0:04:18.000 and at this point that it's been that goal for 0:04:18.040 --> 0:04:21.000 such a long time, and if you are someone who's 0:04:21.040 --> 0:04:24.800 heavily goal orientated, then it's somedingly like, well what do 0:04:24.880 --> 0:04:28.040 I do next? And one other issue I think, and 0:04:28.080 --> 0:04:33.840 I think this afflicts men, or at least full time 0:04:34.240 --> 0:04:39.880 career driven people quite badly. Your goal is okay, let's retire, 0:04:40.440 --> 0:04:43.120 and then your next big goal becomes, well, actually, my 0:04:43.160 --> 0:04:47.560 next big goal is is death. And if you're not careful, 0:04:47.920 --> 0:04:51.880 then you sort of spend your retirement with that sort 0:04:51.920 --> 0:04:54.080 of looming over you. Is almost like it's like, well, 0:04:54.080 --> 0:04:56.880 what am I doing now? And I think that I 0:04:56.920 --> 0:04:58.760 do think that. I mean part of what Craig is 0:04:58.800 --> 0:05:01.839 talking about here and we probably wouldn't discuss this into 0:05:02.080 --> 0:05:06.040 but is what purpose do you replace? 0:05:07.160 --> 0:05:07.440 You know? 0:05:07.720 --> 0:05:10.640 What is your new purpose? How do you keep building? 0:05:11.400 --> 0:05:13.520 Yeah? But is this why so many people are obsessed 0:05:13.560 --> 0:05:18.479 with inheritance tax? Your new goal becomes not paying inheritance tax. 0:05:18.720 --> 0:05:20.560 You know, first you're accumulating and now you've got to 0:05:20.560 --> 0:05:23.400 find something else, something else financial, And it's all about that. 0:05:23.440 --> 0:05:27.960 I don't know anyway. Yeah, everyone needs a target, everyone 0:05:28.000 --> 0:05:31.279 needs an obsession. You know, target driven people are the 0:05:31.320 --> 0:05:34.400 most Well, this is not a self help podcast. We 0:05:34.480 --> 0:05:36.520 keep saying, we get, we get. We have a guest 0:05:36.560 --> 0:05:38.000 coming up, and now he's going to think he's on 0:05:38.040 --> 0:05:42.080 a self help podcast. Georgia, not on a self help podcast. Okay, 0:05:42.320 --> 0:05:47.440 financial podcast. So moving on the key point here being 0:05:47.440 --> 0:05:51.400 there are no pockets in a shroud. So this that's 0:05:51.440 --> 0:05:53.720 a wonderful phrase, doesn't It keeps coming up on this podcast. 0:05:53.800 --> 0:05:57.400 So all this raises some really interesting questions. What is 0:05:57.440 --> 0:05:59.800 the best way to scenario plan for your retirement? How 0:05:59.839 --> 0:06:02.560 can you feel well informed about what you're realistic spending 0:06:02.560 --> 0:06:05.400 limits are. How can you give yourself a spending target 0:06:05.480 --> 0:06:07.880 to work for as opposed to a saving target to 0:06:07.880 --> 0:06:10.080 work towards, particularly if you have spent the last forty 0:06:10.160 --> 0:06:12.800 years aggressively saving, which by the way, is not exactly 0:06:12.800 --> 0:06:15.320 what we would advise on this non self help podcast. 0:06:15.680 --> 0:06:17.680 So to help us talk about that and address some 0:06:17.680 --> 0:06:19.160 of the issues that had been brought up by Greig, 0:06:19.200 --> 0:06:21.480 Thank you again, Craig. We have invited on George who 0:06:21.480 --> 0:06:25.160 as a chartered financial planner and retirement planning a specialists 0:06:25.279 --> 0:06:29.400 firm is called Flying Colors Advice. Welcome George, and thank you. 0:06:29.480 --> 0:06:31.800 Sorry about that lengthy introduction, but do you know I 0:06:31.920 --> 0:06:34.280 was up all night worrying about or having a target anymore? 0:06:34.279 --> 0:06:35.520 As I age, I was. 0:06:35.520 --> 0:06:38.159 Going to say, I absolutely love the introduction. It was 0:06:38.240 --> 0:06:41.080 great and you perfectly articulated what I've heard so many 0:06:41.120 --> 0:06:44.200 times from clients, maybe not said directly. You seem to 0:06:44.240 --> 0:06:46.240 have every detailed kind of work through, but it was 0:06:46.279 --> 0:06:49.120 an amazing intro. So I was nodding my head along 0:06:49.160 --> 0:06:49.440 to it. 0:06:49.520 --> 0:06:51.960 Thinking that's great, thank you. 0:06:52.200 --> 0:06:54.440 First, I just want to acknowledge that, you know, it's 0:06:54.480 --> 0:06:57.279 really difficult to get this right because this is a 0:06:57.279 --> 0:07:00.200 first world problem. But it's a problem nevertheless, and hit 0:07:00.279 --> 0:07:02.600 now on the head where it's as much psychological as 0:07:02.600 --> 0:07:05.680 it is financial. And we're creatures of habit and at 0:07:05.680 --> 0:07:07.760 the end of the day, the same habits that are 0:07:07.760 --> 0:07:10.440 going to make you financially successful are probably going to 0:07:10.480 --> 0:07:14.160 make it quite hard to spend if you are financially successful. 0:07:14.240 --> 0:07:16.960 The vast majority of us, we part of our identity 0:07:17.040 --> 0:07:20.400 is we become accumulators, and that's all well and good, 0:07:20.560 --> 0:07:22.760 But then the problem is what happens when the figures 0:07:22.800 --> 0:07:25.760 are supposed to go down? How exactly do we plan 0:07:25.880 --> 0:07:29.000 for that? I think when I read kind of Craig's question, 0:07:29.520 --> 0:07:31.720 the thing that really struggle me, if I'm being honest, 0:07:31.800 --> 0:07:34.960 is don't we beat ourselves up so much on everything? 0:07:35.240 --> 0:07:37.400 Which is that if it's not crisis because you're not 0:07:37.440 --> 0:07:40.360 saving enough. It's crisis because maybe you've not spent the 0:07:40.480 --> 0:07:44.360 right amount. And this, especially in retirement, this is so challenging. 0:07:44.360 --> 0:07:47.240 You know. William Sharp's a Nobel Prize winner in economics. 0:07:47.760 --> 0:07:52.480 He called turning your lifetime savings into sustainable income the nastiest, 0:07:52.600 --> 0:07:55.920 hardest problem in finance. And the reason he did is because, 0:07:56.120 --> 0:07:58.040 as Johnny said, we don't know how long we're going 0:07:58.080 --> 0:07:59.880 to live. We don't know what inflation is going to be, 0:08:00.000 --> 0:08:01.680 we don't know what market returns are going to be, 0:08:02.080 --> 0:08:03.480 we don't know if we're going to need care, and 0:08:03.480 --> 0:08:05.280 we don't know what the sequence of returns are going 0:08:05.360 --> 0:08:09.240 to be. So all of this kind of adds together. 0:08:09.680 --> 0:08:12.920 But for Craig, you know, I think the thing to 0:08:13.160 --> 0:08:15.040 put himself on the back with is he said, you know, 0:08:15.160 --> 0:08:18.760 kids settled, no mortgage retirement, where it seems like he's 0:08:18.800 --> 0:08:23.200 acknowledging he's got financial security, he has options, and probably 0:08:23.240 --> 0:08:25.960 the first step to resolution might just be taking step 0:08:26.000 --> 0:08:28.960 of stock of what he's achieved first, as opposed to 0:08:29.040 --> 0:08:31.600 looking at the missed opportunity. But there are things we 0:08:31.640 --> 0:08:33.160 can do to address the missed opportunity. 0:08:33.200 --> 0:08:36.320 But as well, when you say the missed opportunity. What 0:08:36.320 --> 0:08:38.640 do you mean the fact that he has possibly oversaved 0:08:39.120 --> 0:08:41.839 and he hasn't. This man has not spent enough time 0:08:41.880 --> 0:08:42.960 in the Maldives in his head. 0:08:43.920 --> 0:08:47.120 Yeah exactly, And I am kind of inferring slightly from 0:08:47.160 --> 0:08:50.679 the question, but I think there's the kind of the end. 0:08:50.720 --> 0:08:52.800 But he says, enjoy your money, live your life to 0:08:52.840 --> 0:08:57.240 the full. Lifelong habits persist and I can't, and he 0:08:57.320 --> 0:08:59.880 kind of the indication is sort of maybe wasted opportunity. 0:09:00.800 --> 0:09:03.160 I think the big thing I'll be saying to him 0:09:03.200 --> 0:09:05.160 as an individual, and then maybe we can kind of 0:09:05.200 --> 0:09:08.400 take some lessons from it, is you are at retirement. 0:09:08.400 --> 0:09:11.080 You're at the ultimate point where you have freedom. And 0:09:11.160 --> 0:09:13.760 sometimes we look at wealth in a really kind of binary, 0:09:13.800 --> 0:09:16.720 singular way we think of money. But in my view, 0:09:16.760 --> 0:09:19.520 and certainly why I encourage my clients, wealth isn't just money. 0:09:19.559 --> 0:09:22.920 It's health, it's relationships, it's purpose, which is what you 0:09:23.000 --> 0:09:25.959 touched upon freedom, it's freedom. Yeah exactly, and he's ticked 0:09:25.960 --> 0:09:29.880 that box. But especially if you ask someone listening who 0:09:30.000 --> 0:09:33.520 is approaching retirement, you need to spend as much time 0:09:33.559 --> 0:09:36.600 thinking about what you're retiring too, as much as you're 0:09:36.720 --> 0:09:39.440 spending time thinking about what you're retiring from. You know 0:09:39.520 --> 0:09:42.880 what happens that first day on perhaps a rainy Tuesday, 0:09:42.920 --> 0:09:44.760 and you're probably listening to this in a very rainy 0:09:44.840 --> 0:09:47.839 January where other people are at work, or maybe you're 0:09:47.840 --> 0:09:50.000 down the golf course and you know, saying the same 0:09:50.080 --> 0:09:52.079 jokes for the fourth time. How are you going to 0:09:52.120 --> 0:09:54.040 fill your calendar so that you can continue to have 0:09:54.120 --> 0:09:54.679 some purpose? 0:09:55.320 --> 0:09:57.000 I suppose you have saying we should say about Craig 0:09:57.080 --> 0:09:59.240 before we move on, that he does seem to have 0:09:59.240 --> 0:10:02.839 a very interesting set up here where his children are 0:10:02.960 --> 0:10:06.240 grown and settled and working and don't need a financial legacy. 0:10:06.360 --> 0:10:08.400 And as I said, I'm sure that they'd appreciate a 0:10:08.440 --> 0:10:11.640 financial legacy, but he's in an interesting position there. I 0:10:11.640 --> 0:10:14.240 think there'd be very few people these days in their 0:10:14.240 --> 0:10:17.360 sixties who could safely say that they felt their children 0:10:17.360 --> 0:10:21.040 were fully financially settled. And spoken to a reasonable number 0:10:21.080 --> 0:10:23.360 of people recently of this sort of age group who 0:10:23.360 --> 0:10:25.800 look around themselves and they see, you know, the value 0:10:25.800 --> 0:10:27.640 of their house, which might have been the thing that 0:10:27.679 --> 0:10:31.400 they intended to leave to their children as their financial legacy, 0:10:31.559 --> 0:10:34.080 that value is falling, particularly if they're and maybe in 0:10:34.120 --> 0:10:38.199 the southeastern and central London, so their mental mind map 0:10:38.280 --> 0:10:40.040 of how much they might have to leave to their 0:10:40.080 --> 0:10:43.079 children is falling. And possibly they're also seeing their own 0:10:43.160 --> 0:10:46.520 children having trouble with cost of living crisis, getting on 0:10:46.559 --> 0:10:50.400 the housing ladder, themselves, financing their children's education, all these things. 0:10:50.640 --> 0:10:52.720 So there is a group of people Craigue is not 0:10:52.760 --> 0:10:56.200 among them, who are suddenly finding in their sixties that 0:10:56.240 --> 0:10:59.560 they have financial pressures they didn't expect. Yeah. 0:10:59.559 --> 0:11:02.040 Absolutely, as far as kind of practical stuff to try 0:11:02.080 --> 0:11:04.520 and address this, and it's so difficult because we can 0:11:04.600 --> 0:11:08.320 never summarize the generation, We can never really generalize. But 0:11:08.520 --> 0:11:10.280 as far as what I do day in day out 0:11:10.440 --> 0:11:13.240 with my clients, the heart of it always has to 0:11:13.240 --> 0:11:15.520 come back to a cash flow plan. So we talked 0:11:15.520 --> 0:11:17.839 about so if you think about on the way up 0:11:17.880 --> 0:11:22.440 you're budgeting, and especially perhaps in your thirties and early forties, 0:11:22.920 --> 0:11:25.160 the reality is you can just go on a mode 0:11:25.160 --> 0:11:27.520 where I just want to accumulate as much as I can. 0:11:27.600 --> 0:11:29.280 You know, the number needs to go up in the 0:11:29.320 --> 0:11:32.719 fastest possible and most tax efficient way. Yeah, but I 0:11:32.720 --> 0:11:35.600 would say when, especially when you start to get towards 0:11:35.600 --> 0:11:37.960 retim start to approach it. That's really where a cash 0:11:37.960 --> 0:11:41.959 flow plan comes in, and professionals like myself, we use 0:11:42.040 --> 0:11:45.760 kind of quite sophisticated modeling software where you can go 0:11:45.800 --> 0:11:47.840 in and actually you can put into the system if 0:11:47.880 --> 0:11:49.960 I wanted to die with zero, how much do I 0:11:50.000 --> 0:11:52.800 need to spend based on these figures, and then I've 0:11:52.800 --> 0:11:54.120 got to spend the rest of the meeting. Go No, 0:11:54.160 --> 0:11:55.360 we're not going to spend that amount, by. 0:11:55.320 --> 0:11:59.079 The way, because it's really racy. But I mean, that 0:11:59.480 --> 0:12:00.960 is the time get right, die broke? 0:12:01.559 --> 0:12:03.800 Is it mere? Though? That's interesting though? 0:12:04.160 --> 0:12:05.760 Is I don't know. I mean, it feels like a 0:12:05.800 --> 0:12:08.360 good target. Then there's no tax to pay. Everything's been 0:12:08.360 --> 0:12:12.400 either given away or spent, and you know, you accumulated 0:12:12.440 --> 0:12:15.480 perfectly and then you decumulated perfectly. So maybe we can 0:12:15.600 --> 0:12:17.720 offer that as a goal to people to get rid 0:12:17.800 --> 0:12:21.720 of their deccumulation anxiety. Make dying broke the goal. 0:12:22.120 --> 0:12:24.840 Yeah, and actually let's dive into that because that actually 0:12:24.840 --> 0:12:27.200 there is some things to talk about, especially when we're 0:12:27.240 --> 0:12:30.040 talking about property and pensions. So I'll kind of dive 0:12:30.080 --> 0:12:33.400 into some kind of legislation. So from twenty twenty seven, 0:12:33.559 --> 0:12:36.000 certain new tax year pensions are going to be inside 0:12:36.000 --> 0:12:39.240 of the estate for inheritance tax, and this has fundamental 0:12:39.600 --> 0:12:41.920 for my clients who have a bit more money. This 0:12:42.000 --> 0:12:46.120 has completely changed the cash flow plan entirely. So just 0:12:46.160 --> 0:12:48.840 to recap on the rules, Basically, this is not including 0:12:48.960 --> 0:12:52.120 defined benefit pensions because they generally die either with you 0:12:52.720 --> 0:12:55.000 or they die after your your spouse or civil partner 0:12:55.000 --> 0:12:58.480 passes away. This is specifically around flexible pensions where you 0:12:58.559 --> 0:13:02.200 have a pot Now current rules tho these were actually 0:13:02.320 --> 0:13:06.240 very tax efficient legacy vehicles because effectively, post of twenty fifteen, 0:13:06.679 --> 0:13:08.640 you could leave them outside of the estate and it 0:13:08.679 --> 0:13:10.719 meant that, okay, if I don't spend my pension, it's 0:13:10.760 --> 0:13:15.679 an incredible legacy option. Because at the moment nil rate 0:13:15.720 --> 0:13:18.199 bands are three hundred and twenty five thousand pound per individual. 0:13:18.600 --> 0:13:21.000 You also have what's called the main residence nil rate band, 0:13:21.000 --> 0:13:23.679 and this effectively means that a single person it's up 0:13:23.679 --> 0:13:26.520 to five hundred thousand. If you're married civil partner, it 0:13:26.559 --> 0:13:29.959 can be potentially up to a million. Now, pensions are 0:13:29.960 --> 0:13:32.520 going to get dragged into the estate from twenty twenty seven. 0:13:33.000 --> 0:13:36.240 And it's not just that there's a cliff edge around it. 0:13:36.320 --> 0:13:38.280 This is assuming you've got a flexible pot, so not 0:13:38.360 --> 0:13:41.400 a defined benefit pension. And if you die after seventy five, 0:13:42.320 --> 0:13:45.440 not only will that be inside of your estate after 0:13:45.559 --> 0:13:47.800 you and your spouse die, assuming you leave it to 0:13:47.840 --> 0:13:50.640 your spouse, but also if you die after seventy five, 0:13:50.679 --> 0:13:55.000 it's taxable at the beneficiary's marginal rate. Now, let's say 0:13:55.040 --> 0:13:57.520 you are based in the South, and let's just say 0:13:57.559 --> 0:14:00.760 your house is worth over a million, which is a 0:14:00.800 --> 0:14:03.120 substantial amount of money. But let's just say that is 0:14:03.160 --> 0:14:05.920 the case. You've also got then your pension part and 0:14:05.960 --> 0:14:08.440 you don't know how long you're gonna live. The problem 0:14:08.480 --> 0:14:12.280 is if your pension is inheritance tax eligible, that means 0:14:12.320 --> 0:14:15.440 they will lose forty percent inheritance tax. And then, in 0:14:15.600 --> 0:14:19.080 like Craig's example, if the kids are settled, perhaps they're 0:14:19.120 --> 0:14:22.800 higher rates then post seventy five, if they then try 0:14:22.840 --> 0:14:25.880 and draw out the pension they've inherited, they've not only 0:14:25.920 --> 0:14:28.600 paid forty percent inheritance tax, but then they might pay 0:14:28.640 --> 0:14:31.680 an extra forty percent if they're higher rate and we're drawing, 0:14:31.800 --> 0:14:33.840 so the tax rate for them would actually be sixty 0:14:33.920 --> 0:14:36.120 four percent when you work it out, forty and then 0:14:36.160 --> 0:14:40.160 forty percent of the residual. So what does that mean? Well, 0:14:40.600 --> 0:14:43.160 going back to Craig's position, we do need to kind 0:14:43.160 --> 0:14:45.640 of reframe it is that if you are affected by that, 0:14:46.560 --> 0:14:50.040 you might not be wanting to spend as much. But 0:14:50.600 --> 0:14:52.840 how do we feel about legacy, how do we feel 0:14:52.840 --> 0:14:55.760 about inheritance tax planning? And sometimes that can get them 0:14:55.760 --> 0:14:57.720 off of the fence a little bit towards action. 0:14:59.000 --> 0:15:01.480 Yeah, so you need basically you need to spend all 0:15:01.520 --> 0:15:05.560 the money inside that pension rapper shearpish to avoid your 0:15:05.600 --> 0:15:07.960 airs having to spend having to pay sixty four percent 0:15:08.000 --> 0:15:11.800 taxation on it. So that's quite a quite a driver 0:15:11.960 --> 0:15:12.400 for Craig. 0:15:13.080 --> 0:15:15.040 Yeah. I think the other thing I think was interesting 0:15:15.040 --> 0:15:17.440 about Craig's comment as well, as he says, what was it? 0:15:17.640 --> 0:15:19.920 I don't want to splash out on mess yourself? So 0:15:20.040 --> 0:15:22.040 nothing to splash out on yourself? The thing I would 0:15:22.040 --> 0:15:23.560 push back if he was a client, I would say, 0:15:23.600 --> 0:15:25.880 what do you mean by that splash out on yourself? 0:15:26.000 --> 0:15:27.400 You know what do you mean by that? 0:15:27.520 --> 0:15:27.800 Is that? 0:15:28.320 --> 0:15:30.640 Is there anything that you're not spending on? Is there 0:15:30.640 --> 0:15:32.440 anything you want to do kind of intentional? Because we 0:15:32.720 --> 0:15:37.280 do have this, you know, this mindset sometimes where no 0:15:37.320 --> 0:15:40.960 one wants to be seen as extravagant. But a pound 0:15:41.000 --> 0:15:44.080 when you are sixty or fifty five it has a 0:15:44.080 --> 0:15:47.880 different utility to a pound when you are eighty five ninety. 0:15:47.960 --> 0:15:50.440 I'm not saying all eighty five year olds don't spend anything. 0:15:51.080 --> 0:15:54.880 I'm saying, no one's promised tomorrow. And you know we 0:15:54.960 --> 0:15:57.080 can't be guaranteed to be going down the ski slopes 0:15:57.080 --> 0:15:59.120 at eighty five. I think that's a fair thing to say. 0:15:59.600 --> 0:16:02.000 I wants to climb killim and Jarrow. He needs to 0:16:02.040 --> 0:16:02.560 get moving. 0:16:02.800 --> 0:16:06.840 Yes, exactly, exactly, And a good financial planner should be 0:16:07.040 --> 0:16:10.800 always encouraging someone to spend their money purposely for today. 0:16:10.800 --> 0:16:13.360 It's not about being wasteful, but it's about going right. 0:16:13.360 --> 0:16:16.200 We've got a cash flow plan. How are you making 0:16:16.240 --> 0:16:18.280 the best use of the money. And I'm quite proud 0:16:18.320 --> 0:16:19.720 to say that quite a lot of my meetings with 0:16:19.800 --> 0:16:21.800 clients I will be saying, look, we can spend a 0:16:21.800 --> 0:16:23.520 bit more. Is there anything you've not done? Is there 0:16:23.560 --> 0:16:27.880 anything you would regret not doing? Because we all live 0:16:27.880 --> 0:16:31.080 our lives a bit on autopilot, don't we, and especially 0:16:31.080 --> 0:16:34.120 if we're used to accumulating, sometimes you need a bit 0:16:34.160 --> 0:16:36.880 of permission to go on the holiday or go business? 0:16:38.400 --> 0:16:39.360 Oh, good business. 0:16:39.600 --> 0:16:45.800 Now these are really tough questions, Lord, which I think 0:16:45.920 --> 0:16:48.120 is sort of getting to the other if you like 0:16:48.160 --> 0:16:50.920 the psychological point. But Krieg is time. But is there 0:16:50.920 --> 0:16:56.040 any advice that you give to people who are sort 0:16:56.040 --> 0:16:58.160 of like certainly they're saying, well, asley, I don't know 0:16:58.360 --> 0:17:00.560 what I want to do. And I think this is 0:17:00.560 --> 0:17:04.719 probably something that hits maybe in the like very early 0:17:04.960 --> 0:17:08.159 retirement rather than you know, once they've got used to it. 0:17:08.200 --> 0:17:10.800 But that is just part of that big kind of 0:17:10.840 --> 0:17:14.040 shift and suddenly thinking I said, what is the point? 0:17:14.160 --> 0:17:16.639 What am I doing here? And then you've got the 0:17:16.760 --> 0:17:18.760 risk that you sit there and think, well, actually, that 0:17:18.960 --> 0:17:21.000 hobby that I spent ages saying I was going to 0:17:21.040 --> 0:17:22.919 spend you know, the rest of my life in the 0:17:22.920 --> 0:17:25.719 golf course, I don't actually fancy that anymore. Is there 0:17:25.720 --> 0:17:28.160 anything you have a turn around to people and say, well, look, 0:17:28.320 --> 0:17:30.480 I don't know, like you know, take a holiday for 0:17:30.520 --> 0:17:35.080 a fortnight and just you know, like think about this problem. 0:17:35.119 --> 0:17:37.520 I mean, if you get any sort of suggestions for 0:17:37.600 --> 0:17:40.960 that early point after retirement and how you can sort 0:17:41.000 --> 0:17:43.680 of ease yourself gently into that. It's just because change 0:17:43.720 --> 0:17:46.920 is traumatic it's like, how do people take time out 0:17:46.960 --> 0:17:47.440 from that? 0:17:47.840 --> 0:17:50.320 Yeah, this is a really good question, and the truth 0:17:50.359 --> 0:17:52.040 is the best time to think about this is before 0:17:52.080 --> 0:17:54.040 you retire, not on the day of retirement. There's going 0:17:54.119 --> 0:17:55.920 to be so much that will change at that point, 0:17:56.000 --> 0:17:59.680 you'll have that identity shift that like anything, if you're 0:17:59.680 --> 0:18:01.520 going to make a big change, the best thing to 0:18:01.520 --> 0:18:03.600 do is to ease yourself into it. And that doesn't 0:18:03.640 --> 0:18:07.320 necessarily mean continue working, although sometimes part time work can 0:18:07.400 --> 0:18:09.440 be a really good way to ease your way into it. 0:18:09.680 --> 0:18:12.600 But you should be looking at your calendar and thinking, 0:18:12.680 --> 0:18:14.679 how where am I going to get the purpose that 0:18:14.760 --> 0:18:16.399 I had from work? Where I'm I going to get 0:18:16.440 --> 0:18:18.639 the engagement? If we go to the gym to keep 0:18:18.680 --> 0:18:21.040 ourselves physically fit, how am I going to remain mentally 0:18:21.080 --> 0:18:23.920 strong and resilient and make sure that I've got things 0:18:23.960 --> 0:18:27.040 to fill my time. So absolutely answer your question, John, 0:18:27.280 --> 0:18:29.080 I am speaking with my clients and saying, okay, so 0:18:29.160 --> 0:18:31.359 what are you retiring to you know, tell me about 0:18:31.359 --> 0:18:33.159 your weekend, you know, tell me about what you're going 0:18:33.200 --> 0:18:35.320 to be doing to fill your time. Now, for those 0:18:35.359 --> 0:18:38.840 that are highly engaged, they will list tons of stuff 0:18:38.840 --> 0:18:42.680 around the house hobbies, you know, things are going to do, volunteering. 0:18:43.080 --> 0:18:45.959 Often it tends to come with maybe perhaps a bit 0:18:46.000 --> 0:18:48.560 of extra family support they've got grand kids on the 0:18:48.560 --> 0:18:51.399 way or something along those lines. And that's always great 0:18:51.400 --> 0:18:53.600 to hear the people who I worry about, and I 0:18:53.640 --> 0:18:55.480 always push back and just say, look, I think you 0:18:55.560 --> 0:18:58.520 really need to think about this is the kind of 0:18:58.560 --> 0:19:00.760 the perhaps the one who's been the big as the executive, 0:19:01.080 --> 0:19:04.480 who has maybe not had time or the inclination to 0:19:04.520 --> 0:19:07.000 think about it. Maybe, if I'm being honest, it's something 0:19:07.040 --> 0:19:09.840 they don't really want to think about because they've got 0:19:09.880 --> 0:19:12.040 a lot of their identity from what they're doing in work, 0:19:12.560 --> 0:19:15.960 and it's so individual, so it's difficult for me to 0:19:16.000 --> 0:19:19.360 take a sweeping statement. But I would often push back 0:19:19.359 --> 0:19:21.600 in those conversations and say, are you sure you've got 0:19:21.720 --> 0:19:24.639 enough to you know, to really enjoy your retirement, because 0:19:24.720 --> 0:19:27.720 the truth is there are some who regret retiring, and 0:19:27.760 --> 0:19:29.640 we don't want that as a planner. I don't want 0:19:29.640 --> 0:19:31.600 to see that. I don't want to see you, you know, 0:19:31.680 --> 0:19:33.720 a couple of times a year looking more miserable every 0:19:33.720 --> 0:19:34.359 time I see you. 0:19:34.640 --> 0:19:38.800