InvestmentRetirement PlanningAAM Is it retirement or financial independence

Is It retirement or financial independence?

Call it what you will, we all want it anyway

It all used to be so simple didn’t it?

For almost every post industrialist generation that came before us, the formula was simple:

Work to the age of retirement, usually somewhere around 65, claim your pension, and live out your life doing something that you actually want to do rather than have to do, and acquire, hopefully, enough money to do both that and last to the end.

Yes, it was simple, but it was also rigid and, for many people, depressing for both its predictability and limiting factors on life in general. You had to work, usually for someone else, you had to do it for as long as they said and on an income that you could only influence — at best — once or twice a year at reviews.

If you played the game, toed the line and were lucky enough to get a good company pension scheme (something, alas, that is not too common these days) you could even do quite well. The system did work. It still does to some extent.

However, somewhere along the way, especially in the last couple of decades, this thinking began to get challenged. For many people this traditional and predictable pathway is no longer desirable for three reasons:

  1. On reaching retirement age most people now understand, regardless of whether they act on it or not, that they must plan properly to have sufficient income in retirement. It is usually no longer viable to rely on state pension schemes alone. I’m sure we all know people who have found themselves in terrible financial situations through poor planning or life choices in their younger years, often prompting us to reassure ourselves that it would never happen to us.
  1. This rule about retiring at a certain age is entirely entrenched in the old system, where switching to the state pension for income was very much the deciding factor. But does it still hold the same power in this modern era? After all, if you’re able to stop working because your investment or passive income now exceed your salary, who says you have to wait until you’re 65, 50 or even 40?
  1. Most people feel like they still want to contribute even if their working life has finished, blurring the lines between retirement and semi-retirement.

Surely, this should be about choice, not age.

In fact, achieving financial independence is more of journey than a single destination and the chances are you’ve already achieved some of the milestones.

For example, when you were a child, you were entirely financially dependent on your parents. Later, perhaps when you started work, you broke that dependency and became self-sufficient. If you managed to wriggle out of the trap of consumer debt, you achieved another form of independence.

Then, if you managed to achieve that, pay off your mortgage and acquired enough savings or investments to fund your lifestyle for, say, another 25–30 years, then, congratulations! You have achieved the Holy Grail! That, by the way, doesn’t require ANY age limit other than one you’ve set for yourself.

Retiring early, or even just making sure you have ample funds available when you do finally hang up the hat, is no longer a pie-in-the-sky dream. In this day and age, with the myriad of options available, it is entirely achievable, some would argue essential, with some careful planning and some simple choices.

We have seen many clients successfully adapting their lifestyles with this goal in mind using all manner of vehicles depending on where they are in their journey, including:

  • Building a property portfolio or even just a single property generating income
  • Having an invested portfolio from which an income can be drawn from
  • Working part time, allowing them to continue contributing on their terms, and reducing draw down requirements on their savings
  • Returning to their previous companies as highly paid consultants, working only when they want to
  • Creating and running a business doing exactly what they want to do
  • A mixture of some or all the above

The fact is that there are so many options available in this modern, fast-changing world that we live in. It is more than ever, up to us when we will retire. It’s empowering, it’s liberating, but for many of us, it’s also terrifying!

The reality is that it needn’t be. Choosing both the date and lifestyle of your own retirement is entirely possible and achievable wherever you are on your own journey. Ordinary people do it every day, but it can’t happen without proper planning to ensure you’re on track, you’re being tax efficient and ensuring your plans are solid to start with.

It is true, by the way, that the earlier you plan the easier it is to achieve your goals and the more flexibility you have meaning, by definition, that younger people can start with a slight advantage. That said, like retirement itself, age is not as relevant as it used to be if you have a plan, are sticking to it and are reviewing it regularly. You can still take control over the day you change your Facebook profile from ‘working’ to ‘retired.’

Of course, we could sit here all day and discuss whether this is actually called retirement, semi-retirement, early retirement or financial independence, but I’m not sure any of us would be too worried at the point we achieve it.

After all we’ll have all the time in the world to come up with the perfect answer, won’t we?

In an increasingly complex and competitive world, expert retirement planning advice is key to securing your future. So, contact us today and get all your financial affairs in order.


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