IFA or Psychologist?

Pat_Fleming

Ganga wrote: »

Without coming across as someone who is jealous/envious of people who come on this forum asking for info/help/guidance and have more money than a small african nation and keep on saving/do not like spending it.,What is the point if you have no enjoyment and no one to leave it to,what happens if bad health comes knoking.the wife runs of with the gardener etc.
Remember you cannot take it with you ( well you can always put it in the coffin ) spend it whilst you still have you health and the mental capacity to enjoy it.

I was reluctant about posting because of this. You have misunderstood. I am fully aware of how lucky I am to be in my financial situation. I am definitely not asking how to hoard more money. Rather, the post is about coming to terms with changes in general & changes in attitude in particular.


(I think) I am wanting to know how to transition from being a life-time saver with the accompanying mindset of always trying to be prepared for the unexpected & gaining an insight of what the "bigger picture" is.



I know that I am not explaining this very well. It's because I don't fully understand it myself. All the time I've been visiting this site, people have been saying that you must know what your specific goals are. I thought I knew but it turns out that maybe I didn't!

I have friends who I have worked with for years & who finished their careers in a similar way. I've watched people who were bad with money all their lives who suddenly had large lump sums from redundancy and/or pensions who have just gone mad (it seems to me). I've even seen people transferring their final salary pensions to get at the cash early. They don't seem to realise that what they have now is all they are ever going to have.

I don't think I'm having a breakdown or a mid-life crisis but I need to know that whatever happens, we aren't going to end our days in the cheapest council run care home because that's all we can afford.

But at the same time, I don't want to be eating beans out of the tin "just in case."


I know that I have the ability to "buy my own future" but just want to make sure that I can do it the right way.

Terry_Towelling

Ganga wrote: »

...the wife runs of with the gardener etc.

Pat, you need to sack the gardener right away!

bostonerimus

Pat_Fleming wrote: »

I was reluctant about posting because of this. You have misunderstood. I am fully aware of how lucky I am to be in my financial situation. I am definitely not asking how to hoard more money. Rather, the post is about coming to terms with changes in general & changes in attitude in particular.

.

When the wages stop and you are left to generate income on your own it can be scary, but you have the fairly generous final salary pension so money shouldn't be an issue. I think the greater problem is just adjusting to the possibility of 30 or 40 years where you are entirely responsible for funding your life.

I found that having a budget was a great help as it game me confirmation that I wasn't spending too much. I suggest you do what I did.....control and track spending so that there's something left from the DB pension and SP at the end of the month and let that accumulate in a cash account and then invest it at the end of the year. I'm not comfortable with spending down my DC pensions and other savings so my plan is to just not do that and keep them accumulating through retirement. I did that for about 3 years and then fell into some part time work and I save all my wages which is really a bit silly, but my goal now is to leave a big inheritance for my nieces rather than swapping my Honda Civic for a BMW 5 series.

Linton

Changing from pension accumulation to decumulation is a serious step that can be difficult to cope with. The risk is that you die without having done all the things you would have wanted to do despite leaving a fortune. Or, worse, you run out of money too early. For me the answer is in planning.


In the same way as you financially plan the lead up to retirement you need to plan the period from retirement to death. Develop a year by year financial plan and set the spend budget each year at a level sufficient to provide sufficient wealth at the end to prevent you worrying, but no more than that. Then consider it your duty to spend up to budget. How you spend money beyond that needed for the basics is up to you. It could be holidays when you can relax rather than worry whether you are spending too much, buy the car you always wanted but couldnt justify, paying £12 rather than £8 for wine, one-off domations to charity, gifts to family etc etc


As with the plan to achieve retirement you need to monitor progress. If reality diverges from plan you will need to modify your spending budget. Or rather than changing your spending budget you could review your investment strategy. If you are continuing to accuumulate wealth despite your best efforts lower your rate of return by reducing the level of risk.


Perhaps you can apply that strategy to your wider retirement life. Identify a list of targets and then plan how and when you ae going to achieve them. Any major costs can be linked to the financial plan.

atush

I've never considered that. What is the advantage please?

Basically it has to come out somehow. So you'd want it to come out w/o tax (ie does your OH have any PA left? She could draw that each year w/o tax) or to pay as little as possible. Money drawn from the pension doesnt need to sit in cash, or be spent. You can put it in a S&Sisa and even in the same funds if you like. Meaning then income/capital can be tekn whenever you like w/o further tax.

We have nephews & nieces but these now have families of their own (who may in turn have their own families by the time any decisions need to be made) so don't really know what to do in the longer term.

In the unlikely event that i am the last to die, I will leave some cash to my 3 nieces. But given we have 3 boys they will get most of it. But I wont be the last to die, my husbands parents made it to 90-95 and mne died at 57 (father, brain aneurysm) an 68 (kidney failure 68 type 2 diabetes).

Plus they were heavy smokers. And smoked in front of me from birth (incl inside cars on long journeys) so the reports this week I am doomed to die early is worrying

Pat_Fleming

Linton wrote: »

Changing from pension accumulation to decumulation is a serious step that can be difficult to cope with. The risk is that you die without having done all the things you would have wanted to do despite leaving a fortune. Or, worse, you run out of money too early. For me the answer is in planning.


In the same way as you financially plan the lead up to retirement you need to plan the period from retirement to death. Develop a year by year financial plan and set the spend budget each year at a level sufficient to provide sufficient wealth at the end to prevent you worrying, but no more than that. Then consider it your duty to spend up to budget. How you spend money beyond that needed for the basics is up to you. It could be holidays when you can relax rather than worry whether you are spending too much, buy the car you always wanted but couldnt justify, paying £12 rather than £8 for wine, one-off domations to charity, gifts to family etc etc


As with the plan to achieve retirement you need to monitor progress. If reality diverges from plan you will need to modify your spending budget. Or rather than changing your spending budget you could review your investment strategy. If you are continuing to accuumulate wealth despite your best efforts lower your rate of return by reducing the level of risk.


Perhaps you can apply that strategy to your wider retirement life. Identify a list of targets and then plan how and when you ae going to achieve them. Any major costs can be linked to the financial plan.

On a quick look, this looks like excellent advice. I'll read into it & answer more later. At the moment, I've got to go outside & punch the gardener!

mollycat

Pat_Fleming wrote: »

I know that I am not explaining this very well. It's because I don't fully understand it myself. All the time I've been visiting this site, people have been saying that you must know what your specific goals are. I thought I knew but it turns out that maybe I didn't!

I have friends who I have worked with for years & who finished their careers in a similar way. I've watched people who were bad with money all their lives who suddenly had large lump sums from redundancy and/or pensions who have just gone mad (it seems to me). I've even seen people transferring their final salary pensions to get at the cash early. They don't seem to realise that what they have now is all they are ever going to have.

I don't think I'm having a breakdown or a mid-life crisis but I need to know that whatever happens, we aren't going to end our days in the cheapest council run care home because that's all we can afford.

But at the same time, I don't want to be eating beans out of the tin "just in case."


I know that I have the ability to "buy my own future" but just want to make sure that I can do it the right way.

Pat, apologies in advance if i have the "wrong end of the stick", with regard to where you are coming from in the thread.

I still think you are over-thinking aspects of this, (and hope you do not find that observation in any way insulting).

The biggest myth about decision making is that it is always crucial to make the correct choice. This leads to excessive procrastination, deferring decisions, compromising when your instinct tells you to be bold etc, etc.

Obviously, a small amount of the time it is crucial; if I decide to step out into traffic, I may die under a car.

But the vast majority of time it is not crucial; a poor choice can be a learning opportunity, may be recoverable, or may actually cause you to be disadvantaged, but not in a catastrophic way. Most poor choices on a day to day basis cause short term inconvenience only.

In your case, selling fund A rather than B, or downsizing your home, or choosing to have a blow out holiday may turn out with hindsight to have been the wrong choice, but will not end with you eating beans on toast in your final years.....you are exagerating the potential consequences of the future choices you will be making.

The sensible, moderate mind that managed to accrue your assets is a huge protective factor against your fear of somehow getting the decumulation bit wrong.

Like someone above said; there is a lot to be said for JFDI, (at least some of the time)!

All IMHO of course. As I said earlier, Good luck!:)

Kynthia

You sound very "turned-around" with your sudden change in status. I can't imagine the psychological effect of not only moving from accumulation to decumulation, you gone from being a worker to retired and you perhaps haven't prepared for the latter enough hiwever all big life changes take time to adjust so go easy on yourself and give yourself some time.

I like what the poster above says about not becoming paralysed over the decisions you need to make. You're unlikely to unknowingly do something incredibly risky. You have a guaranteed income for life with your DB and state pensions so that combined with you your large savings balances means you aren't going to run out of money unless you did something you knew could result in that. So start making some small decisions knowing they are not going to result in disaster, until you start to feel more confident.

So perhaps for a few weeks forget about planning for your whole retirement and focus what you'd like to do with your time. Keep it short term, maybe just start trying out new activities, expanding hobbies, booking a holiday, arranging to meet friends, etc. Everything doesn't need deciding right-away and it will give you time to adjust.

DairyQueen

I understand your dilemma. I am also in the 'over-thinker' category and retirement planning sometimes feels like herding cats.

For forty years we are conditioned to running our lives around employment, childcare, debt management and long-term saving. In retirement the boundaries shift. Individual circumstances vary but, typically, the focus is leisure, eldercare (our parents and our own care) and the tension between spending/conserving assets.

During our working lives we plan knowing that we will almost certainly retire before we die. Retirement is a point that will take place for most within a reasonably short age-span (late 50s through 60s). The date can be controlled to some extent by our ability and willingness to save.

Then we retire and the timeframe over which we need to plan is no longer remotely under our control. It could be 1 year, it could be 40. We don't know where we will appear on the life expectancy chart.

If we are single/divorced/the survivor of a couple, the chances are likely that longevity = care of some type. The longer we live the higher that likely cost - especially for the childless or those whose children are unable or unwilling to provide support. The contingency required for this possibility is far higher than the emergency fund required to protect against events like redundancy during our younger years.

Yep, herding cats.

I think that Linton's strategy is sound. Plan your spending year-to-year. Ensure your savings remain at a level that enables you to sleep nights. Allow some contingency to fund at-home and/or residential care should you/spouse require it but don't allow the contingency to force you into a position of current frugality. Your house equity should suffice.

All those years of saving have provided you with flexibility about how/when you spend. Enjoy planning the detail of your leisure/holidays/activities this year and let your savings take care of next year, and the year after, and the year after that.

I also think that the cash allocation is high, especially as you don't need it as contingency against suspending drawdown to meet essential spends. However, given that you have sufficient guaranteed income to cover expenses you can afford to take the inflationary drop in value if so much cash provides peace of mind.

You seem to be doing a pretty good job so relax and enjoy making the most of your investments, time and spending.

Triumph13

I can completely sympathise with how all this is messing with your head and would second several of the key points coming from other responders, especially:

• You need to focus on maximising your happiness now, not your wealth;
• You don't NEED to get the best or most efficient solution financially.

Spending capital is hard when you've been a saver. Trying to work out how to manage spending that capital over a period of unknown length is even harder.
One practical suggestion, which may help you, is to put much of your investments into Inc units and/or income funds. You can then do your best to ignore the capital completely, but treat the income as 'fun money' and concentrate on spending it in a way that gives the most happiness. It won't be the most efficient answer possible, but it would almost certainly be a lower stress route.