Retiring is one of the biggest events in your life. You have been working for almost all of your adult life. It is an area where you have a considerable amount of expertise, you are respected for what you do, it takes up more time than anything else you do, it is the source of your income. And then it stops. Are you ready for it?
Can you afford to retire? This is the biggest question of all. How much money do I have and what are the sources of this income? Most people have different sources of income and they become available at different times. You may receive an income from an ARF but also have an investment policy that you can draw down an income from when you wish. The State pension is payable from 66. Do you have rental income or are you thinking of selling the property and releasing the capital that is available?
I wrote 10 years ago that carrying debt into retirement is the biggest mistake a retiree can make. I haven’t changed my opinion on that. You do not want debt obligations in retirement as it will take up a bigger proportion of your income.
Have you factored inflation into your calculations on the cost of living in retirement? We will probably live for 30 years+ in retirement. The cost of living will increase over that time, it needs to be factored in. You also have to take account that you are likely to spend more money when you are young and healthy than when you are older and no longer interested in going on holidays.
What are the options with your pension at retirement? What is the difference between an annuity and an ARF? Which one suits you best and how much money can you expect from each?
What are you going to do with your tax free lump sum? Am you going to spend it on big projects or are you going to invest it for future use? If you invest it, what funds are you going to invest in and what are the risks?
Will you receive the full State pension at age 66 if you retire now? If not, what do you need to do receive the full State pension (It is worth about €310,000 at today’s rates).
Is you will up to date to reflect your wishes? And it is done in an efficient manner for you beneficiaries? Does it include Power of Attorney so other people can act on your behalf if you lose the capacity to make your own financial decisions?
When you retire, what am you going to do to remain active and fit? Are there activities that you are not doing now that you would like to do in the future?
Are there parts that will need to be replaced? Knees? Hips? Or is it time to get those veneers? When will they need to be done and how do you go about it? Do you have health insurance to cover the cost or are you using the public service? Should you review the health insurance that you have in place? As we get older, parts of our body break down, it’s just wear and tear. It is important that your health insurance reflects the stage you are at in life and covers more procedures and have lower excesses.
You have spent your lifetime building up you savings so I can have a happy retirement. You have reached that goal. Are you prepared to start saving that money? Will you be ok going from a steady salary to getting your income from an ARF which fluctuates in value? Or would an annuity be more suitable?
How are you going to keep yourself busy? Especially if you are single/widowed, will you get enough social interaction in retirement? Work allows us to meet and interact with other people for large parts of the day. Will you still get that interaction?
For those who had highly regarded positions for large parts of your career, are you ok with just being seeing as a retired person instead of the captain of industry or leading authority in your field that you seen as previously? Is that important to you? If it is, is there a consultancy role that you can move into so you continue to be held in the same regard without the same pressures as before?
You don’t have to go to work anymore. The alarm clock can be turned off. Every day is like the weekend now. How are you going to adapt? It is a big change to your routine. Do you have a plan on replacing that routine to fill your days and to give you a reason to get up early every morning?
How will your spouse cope with you being around the house all the time? For older generations, the man usually went out to work and the woman stayed at home and looked after the kids. She had her routines for decades and suddenly there there’s someone getting in the way! For couples who are both retiring from work, have you discussed you plan for both of you being at home instead of work? Are there things you want to do together or separately?
Do you want to stay where you are currently living? Is there a plan to downsize, move to another part of the country or even abroad, even for a part of the year? If there are going to be major changes to where you live, it is better doing it when you are younger and have the energy to undertake such a big event.
As you can see, there is a lot involved in getting ready for retirement. It is not simply just a case of not having to go to work in the morning. Time should be taken in making sure you are ready to retire and get the most out of it.
Steven Barrett
24 July 2023