Case Study - Planning for life after work

Jasmine is 63 and wants to stop working in 2 years. Jasmine has been reluctant to think about her retirement. She is unsure what her finances will look like in retirement and the worry that she may not be able to afford the lifestyle she wants has stopped her from taking any action.

She has approached me to work on a plan.

The starting point

My starting point is always to listen. Jasmine tells me about her thought process so far and her concerns. This helps her to order her thoughts and it provides me with information.

I then ask questions to clarify my understanding around her priorities and objectives, but especially around her finances.

The perfect week

In order to find out whether Jasmine can afford her retirement, we need to understand what kind of lifestyle she wants for her life after work.

Many people look forward to no commitments and having lots of time to themselves, but the reality is that this will get boring very quickly and the lack of daily structure can have an impact on health and wellbeing.

I ask Jasmine to visualise her perfect week to get a feel for her desired everyday life. She is tentative at first but gets into the exercise after a while. She identifies that she wants to go for a walk everyday as she has read that this is good for physical and mental health. She wants to get up relatively early every morning and start the day with a walk. She also wants to get into a habit of reading books regularly. And she wants to socialise with friends.

Jasmine realises that these activities will not keep her busy enough. She thinks further about her perfect week and realises that she wants more social interactions and she wants to keep her mind active. So, she identifies that she could get a dog and get involved in the local dog walking community. And she wants to take on a volunteering role. Her action point is to research which bread of dog she wants and think about which charities she would like to volunteer for.

Shaping life after work

Jasmine can start to see her life after work. The ideas about what she can do keep coming and she feels excited and positive about her future. There are so many possibilities and she decides to create a mood board to capture all her ideas. This is giving her great pleasure as she can add to it until she gets to her retirement date.

Financial information

Jasmine feels much more positive about her life afterwork now. She is even contemplating whether she can start her retirement earlier (but dismisses this as she has made a commitment to her employer)!

She feels ready to tackle the finances now.

The exercise of thinking about how Jasmine wants her life after work to look like is also giving us financial information as we can now estimate her costs for the lifestyle she envisages. This doesn’t have to be fully accurate so we work with approximate numbers.

In addition, Jasmine is providing figures for her income in retirement and her savings, invested pensions and other investments as well as the value of her property and her mortgage. She is in the fortunate position of not having any other debt.

Can I afford my retirement?

Of course, the biggest question for Jasmine is – can I afford my life after work as I visualise it?

Like many people, she has been worried that the answer would be no. As a consequence, she has avoided looking at her finances and she has restricted her spending to be able to save more. This has made her feel nervous and worried and she hasn’t really allowed herself to enjoy life lately.

We talk about avoidance and how this can increase the worry. It doesn’t mean the thing she is avoiding won’t happen. It just means she doesn’t know how it will happen.

We agree that what Jasmine needs is clarity instead. Clarity on her financial position over the long term.

I take all the financial information Jasmine has provided to me, I add some assumptions and project her financial situation over the long term, until the end of an average life expectancy for a woman of her current age.

I can show her two graphs, outlining the development of her income and expenditure over time and of her assets, or overall wealth.

The income and expenditure graph shows that (based on the assumptions used) she can afford the lifestyle she envisages. We even include long-term care costs, which explains the spike in the last five years.  

The graph outlining the development of Jasmine’s assets over time shows that (based on the assumptions used), there are assets left at the end of the timeline. As such, she has a buffer which can cover her should she live longer or has any unforeseen expenditure.

It is important to remember that these projections are based on assumptions, which will change over time. I explain to Jasmine that this exercise provides her with a general sense of direction, but she should not see the figures as set in stone. In addition, we discuss the importance of repeating this exercise in regular intervals to adjust the calculations to changing assumptions and circumstances over time.

Peace of mind

Jasmine is relieved. All the worry is gone. For the first time, she feels that she has clarity on what lays in front of her and she is looking forward to the next phase in her life.

Jasmine says that she felt nervous just before I showed her the graphs, but she thinks it was worth going through this exercise. She now knows the answer to her most important question. She has peace of mind.

In future

We agree to meet again closer to her retirement date to re-visit her plans (in particular as she keeps adding things to her mood board) and to adjust the projections accordingly.

At that point, it will also be important to discuss more practical points (e.g. switching on her pension income, having sufficient cash for the first few months) for her then imminent life after work.

The meeting ends on a high. Jasmine feels prepared for her life after work and knows that I will support her through this period of change until she feels comfortable.

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Names and details have been adjusted to ensure client confidentiality.

Projections are not guaranteed. They are based on assumptions which will change over time. The graphs shown in this article are only an illustrative example and should not be used as guide for your own circumstances.

Svenja Keller Ltd does not provide regulated financial advice. If regulated advice is required, I can refer clients to an appropriate adviser.

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