Maretta Dillon chats again with Derek Bell, Chief Operations Officer with The Retirement Planning Council of Ireland (RPCI).
Last time, Derek stressed the need to assess how retirement will affect you and your relationships with family and friends. This time around, he addresses questions about finance and financial management.
We can expect to live at least 20 years after we retire and often longer. Managing our finances for this extended period is critical. Derek stresses that it is important that we understand what’s happening to our money and savings. We should know about any Social Welfare entitlements or benefits that might be due and in this regard it is important to get a copy of your Social Insurance Contribution Record from Social Welfare (www.mywelfare.ie). We should also be aware of tax obligations after retirement.
Among these concerns are pensions: rarely anyone’s idea of fun but knowing how they work is important if you want to manage your money wisely. It is actually surprising how many people don’t understand their pension and tend to adopt a head in the sand approach. If you are coming up to retirement age, then you should check with your employer/pension provider about your expected pension entitlement. This often has the effect of concentrating the mind.
On the other hand, many people have the option of taking part of their pension benefit as a lump sum. If that’s the case, it is usually a good idea to have thought really hard about what to do with it. Derek advises that people take the time and effort to evaluate and think about what they are going to do with their retirement income. What outgoings are you going to have? What other plans do you have? Where and what do you want to spend your money on? Knowing your monthly income in advance can reduce the stress. Your income may be lower but your tax and outgoings may also be lower and there are benefits!
Chief among these is free travel which can be a considerable advantage. However, there are also reduced charges to cultural institutions and events, exercise options and other activities. If in doubt, it never hurts to ask! Derek counsels moderation in all things; after all, you plan for your retirement to last a while.
Setting a weekly budget or ‘paying’ yourself a weekly wage makes sense rather than frittering money away on unnecessary items – endless cups of expensive coffees are a case in point. Enjoy yourself but don’t lose the plot. As people get older, they tend to need and want less and may prefer to spend their funds on experiences rather than big ticket items which they already have for the most part.
Derek notes that new retirees often plan for the big trip – to visit family and friends – or to simply see new places. Seize the day in this regard, he would advise and don’t wait for the ‘roundy’ birthday or anniversary, go when your health and wealth allow it. Who can tell what your health will be like when the “roundy” birthday arrives?
Retirees, often parents and grandparents, would like to leave some inheritance for their children or grandchildren and can sometimes be reluctant to spend on themselves. Derek is having none of this and has told his own children that they can expect to ‘inherit my debt’. He explains that there is often a peak in spend post retirement – travel and maybe some house refurbishments – but then it settles down to something more normal before potentially peaking later when provision of healthcare might be needed. Retirees need to balance their own requirements against wanting to do the right thing by their extended families. They are not ‘the bank of Mum and Dad’ and their first responsibility has to be to themselves.
Speaking of which, preparing and executing a will is a necessary item on the ‘to do’ list. This is something that people can be reluctant to deal with and there is a certain amount of squeamishness around the whole area. However, if you don’t make a Will, administration of your estate will probably take longer, be more expensive and more stressful for your loved ones. This is something to be embraced and can be strangely satisfying when concluded.
Allied to this, Derek suggests that it’s a very good idea to think about giving someone Power of Attorney over your affairs and Enduring Power of Attorney should one become incapacitated. We all need people to be advocates for us and it is much easier if this is a role that has been discussed and understood in advance. Derek strongly advises that when making a will, and/or Power of Attorney, this is done with the advice of a solicitor in order to prevent difficulties for those who have to carry out your wishes.
If you get all of the admin side of things sorted then you are in a much better place to enjoy yourself. Derek suggests approaching it like a project that may at first need a big push but after that just needs tweaking from year to year as things change and things always change. People can now expect to live almost as long in retirement as they did in the work force. It all needs a bit of preparation! The RPCI discuss all of these financial and legal issues in full detail as a core part of their pre-retirement courses.
Established in 1974, the RPCI is a Registered Charity, a not for profit organisation, wholly independent of all financial institutions and with a voluntary board of directors. RPCI is based at 14/15 Lower Camden Street, Dublin 2 Ph: 01 478 9471 / www.rpc.ie Courses are held in Dublin and around the country on a very regular basis. Please check the website for more details.