Retirement represents a significant change – not just financially, but in terms of lifestyle and purpose. Many senior executives choose to delay their retirement as they consider themselves fit and healthy, and their careers fulfil their need for purpose.
Regardless of the financial success they have achieved through their career, one of the most common questions asked by people in their 50s is: “Can I afford to retire?”.
Rob MacLean, founder, CEO and Principal Advisor for Equitas Partners, said most people don’t know if they can retire and only half of them are actually ready for the big event. With 50 per cent of males becoming unemployed at 58, it’s a question they need to address well before they are faced with the situation.
“Retirement shouldn’t be a guessing game. It needs to be well planned and managed,” Rob said.
“Money gives options. So the main thing to understand is whether you have sufficient money to have everything you need and everything you want to live on beyond your working life,” he explained.
One of the first steps to assess whether you are ready for retirement is to determine your fixed costs of living (e.g. debt repayments, accommodation, insurances, utilities, food, etc.). Then, it’s essential to understand the ‘fun part of your life’ or in other words, the lifestyle and leisure you would like to pursue once retired and how much these will cost.
According to Rob, one of the most common misconceptions is that downsizing from a house to an apartment will also result in down costing.
“Many people choose to sell their house, which probably had no mortgage left, and move to a smaller, more expensive apartment in a desirable location – closer to the city, on the beach or with water views. Experience has shown there’s often no overall cost saving from doing this. In many cases, downsizing should be a lifestyle choice, not a financial decision,” he said.
Once you’ve identified your costs of living, including the essential and lifestyle expenses, it is time to develop a sound financial strategy that will help you grow and protect your wealth while you are still receiving your executive-level salary.
“The trick is to expand your employment by 10 years,” Rob said. “It will make a big difference to your nest egg.”