FT Next Act: how to plan for later life

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What is the best way to approach retirement? I'm Claer Barrett, editor of The Next Act. And joining me now to discuss how to plan the next phase of your life are Lucy Warwick-Ching, the digital editor of FT Money, Lindsay Cook, the FT's Money Mentor columnist, and Tim Bennett, partner at Killik & Co.

Lucy, you have written the cover feature for The Next Act this week, which is called "The Big Questions to Ask Before you Retire." So hit me with some of those big questions.

When do you want to retire? What do you want to do? How much will it cost? You know, who do you want to do it with? Where do you want to live?

And are there any things on your bucket list that you want to do that you can kind of save up for? And people find that life tends to get in the way of these big questions. So, you know, buying a house, that's something that people need to assess, when to have kids, all that kind of thing, when to pay for education.

And then before they know it, they've kind of hit 50. And they haven't made the plans. And actually one person might be spending all their working life thinking that once they retire, they're going to go on a big holiday or move abroad, whereas the other one is thinking, well, I'd like to do some volunteering work, perhaps stay around to look after the grandchildren.

And when people retire, those kind of big personality clashes can happen. And there's some depressing stats about silver splitters. So when people retire, they find they have a bit more time on their hands. And then if they haven't made these plans beforehand, then things can go wrong.

I'm going to move on to Lindsay now to talk about work. So ironically, one of the things in retirement that often splits couples apart is that one of them wants to carry on working. Now it may not be in the same job that they've always done, but they may be somebody who is satisfied through their professional life more than the thought of going on a beach for 10 years.

Well, it's not only wanting to work. Quite often nowadays, people need to work because we're in an age where when I was young, people had final salary pension schemes even in the private sector. And they probably had the same employer for a long time, and they retired on quite a nice pension. People coming up to 50 and beyond now are more than likely going to be in a defined contribution pension scheme, where they take all the risk.

There's a finite amount of money, and it will eventually run out.

A finite amount of money, they don't know how to calculate what they're going to get. And to my mind, before you hit 50, but if you've hit 50 and not done the sums, you should start looking at have you got enough national insurance contributions for a state pension. The state pension is small. But if you don't have a full one, it's even smaller.

How much are you going to retire on? Whether it's at 60 or 70, you need to know roughly how much is going to be there and how many years it's going to last for. If you get to 60, you've got a 50% chance of living beyond 90.

Now that is 30 years of retirement for a lot of people. And so do they eke out their savings? Do they struggle? Or do you look at what sort of life you want?

Do you want to be able to go on a few nice holidays, not a life of holidays and golf? But what are your priorities? I would hope if you're a couple, you've probably got the same rough priorities on the type of holidays you might want, the type of car you might want to drive.

But you've got to also think about maintenance of your home. Is your home new, or is it one of those that just takes so much money every single year? It's going to continue doing that when you're retired. Moving on to you know, Tim Bennett, we've talked a little bit about age so far. But at Killik & Co, what's a typical age of a client walking in through the door who's starting to think about retirement?

Well, unfortunately in a way - but I can see why it happens - a lot of people don't start planning their retirement until they hit 50 seems to be a magic number, for all sorts of reasons. I think people then suddenly think retirement is no longer something that's a distant prospect. It's something that they start to prioritise, and that can be for a number of practical reasons as well.

Perhaps the kids are a little bit older, a little bit more financially independent than they used to be. If you're fortunate enough to have paid down a decent chunk of your mortgage, perhaps you're in a position to actually refocus some more of your efforts on retirement. But what's a shame is that people often are then playing catch-up in their 50s to get to the funds they want to retire, when actually if they'd been able to set aside a little bit earlier and a little bit more often, then they take themselves out of that sort of pressure cooker.

Without further ado, I will leave you all to your retirement planning. Do thank Lucy Warwick-Ching, Lindsay Cook, and Tim Bennett. I'm Claer Barrett, editor of FT Next Act. Don't forget, you can visit ft.com/nextact to read all about this issue and more. Thanks.