You may think of retirement as a stage of life where we are happy and carefree. But in reality, one should at least think of the retirement years in three phases.
1. Go-Go Years
This is when you just retired - full of energy and life. Now is your time to enjoy your place in the sun. No more worries about making ends meet. Just relax, chill, pursue your passions. After all, you are still healthy and hearty. You may even decide to climb a Mountain as last hurrah! Go for it!
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| Let it go! |
Slow-Go Years
This will be after the Go-Go years, where you have had all the fun you wanted to have (or could afford to have). Now, age is catching on. It is less convenient to travel. You prefer to chug along, take a leisurely pace, with the occasional exciting trip or challenge.
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| relax. |
This would be twilight years, where they say - the heart is willing but the flesh is weak. You want to keep your mind occupied and you contemplate life and all that you have done.
Go-Go, Slow-Go, No-Go Helps To Match Incomes/Assets to Expenditures
This helps us think more clearly what the expected expenditures are like during these 3 phases of retirement. Your expenditure will differ according to your desires.
Chances of spending a lot more during the Go-Go years is to be expected, especially if you like travelling, exploring the world and doing things that you had never done in your life. On the other end of the spectrum, expeditures during No-Go years would likely to be on medical care and perhaps even nursing homes or old-age homes.
By splitting the retirement years into 'Go-Go', 'Slow-Go' and "No-Go", you would better be able to match your expected retirement assets/savings/income stream to fund your desired lifestyle.
Income Stream To Meet Basic Needs
Coming back to Lorna's advice on having an income stream to meet basic needs, I think that advice is sound. You would need this basic needs retirement income stream through all your retirement years.
You should have a plan on how to fund the Go-Go years and Slow-Go years. For example, if you have certain assets, you could decide to liquidate them during a certain time and spend that money during those years. This would also help you keep track of your income and expenditure.
My Retirement
I hope to have fabulous Go-Go years and enjoy all that life has to offer with my dear wife. Let's say I retire at 60. I reckon 60 to 70 would be my Go-Go years. There are so many places I want to visit, so many things I want to do in this 10 years. This also means that I need to prepare the funds for it. So it would be prudent to have a good estimate of how much funds are required, and then allocate the savings and assets to those years.
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| Cruising - fun! |
Where our UK properties are concerned, due to the hefty inheritance tax structure, it does not make any sense for us to leave them for our children. Therefore, the plan is to liquidate them all. By when? That is the key question. I think by the time I reach Slow-Go years, it should all be liquidated. Furthermore, we can't predict with absolute certainty, when we will depart from this Earth. Also I have to bear in mind the hefty inheritance tax regime in the UK.
Illustration
By way of illustration, let's say I have 3 London properties, each worth 500,000 pounds. A sensible method would be to liquidate 2 of the 3 properties to fund my Go-Go years and then the remaining property to fund the Slow-Go and No-Go.
Spreading the Eggs
All that said, we should also spread our eggs and not put them all in one basket. So, I am not advocating that you put all your retirement funds into one instrument, be that property or annuities or stocks etc.
It would be prudent first to pay attention to Lorna's advice, of looking at income streams to cover your most basic of needs. Then, also consider the 3 phases of retirement that I have suggested and plan & structure your assets and retirement funds to meet your desired lifestyle during those years.
Happy Investing!
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