How to adopt a healthy retirement mindset and why it matters

The idea of retirement has seen some fundamental changes over the last 10 years. In the UK, this has been due to Pension Freedoms, introduced in 2015, that allowed more flexibility in how we access pension savings.

Instead of working up to the age of 60-something and then reaching a hard stop, many people are retiring gradually. For example, moving from full-time work and phasing into retirement by reducing their hours a bit a time. Or taking on less pressured part-time roles or offering consultancy that take up fewer hours in a week.

Read more: Pros and cons of easing your way into a phased retirement

As well as more flexibility around access to pensions and retirement savings, increasing longevity has also altered the way we think about retirement.

If you’re approaching retirement or have recently retired, you might enjoy a longer retirement lasting up to 20 or 30 years and, thanks to healthy lifestyles and medical advances, often continue to enjoy good health for longer, too.

Reframing retirement as the “third half” of your life

As such, rather than viewing the next chapter of life as your “retirement”, it might be more fitting to reframe it as your “third half”.

And yet, this often requires a certain degree of adjustment – especially if work has played a significant part in shaping your identity. Losing what has defined you and your lifestyle for decades at a time when you still having plenty of energy and drive can prove disorientating.

So, read on for some practical steps that could help you adopt a healthy retirement mindset.

1. Have a clear vision of your desired lifestyle

One of the best ways to plan for retirement is to visualise your future. Take the time to really think about the nitty-gritty of this new phase of life – where you will live, how you will spend your days, what you'd like to achieve, and who is beside you.

A retirement full of adventure and far-flung travel will likely require a different budget than if you’re looking forward to being able to spend more time at home, enjoying watching your grandchildren grow up or immersing yourself in pleasurable hobbies for hours on end.

Sadly, according to research from Aegon, fewer than 1 in 4 of us are aware of the day-to-day experiences that give us joy and purpose in life.

So, answering some of the questions posed above could give you a clearer idea of what it is that motivates and brings you happiness. And knowing what will make you happy could help you better understand how you’d like to spend your days, and how much money you may need to achieve your aspirations.

2. Create structure for your days, weeks, and months

Next, you need to get strategic and set out a structure for the days, weeks, and months ahead. This could help ease the transition from your usual nine-to-five routine.

You don’t need to account for every minute of the day, or even have a plan for every day of the week. However, popping some regular dates into your diary can help bring some structure into your week and ensure that you won’t waste the days away.

A schedule that aligns with your hopes and dreams from step one can help you to avoid any potential boredom or restlessness that could otherwise easily creep in.

Indeed, studies have shown that a structured life is one of the keys to happiness.

Previously, work will likely have created some of schedule and structure in your life. So, when you retire, and are faced with days and evenings with nothing but leisure, it can be helpful to define some specific routines to create a structure that suits.

3. Consider how your income needs may change over time

With a clear idea of your how you’d like your retirement, or third phase, to look you should be able to start considering how much income you may need to fulfil your goals.

One aspect to be aware of as you begin to think about your costs in retirement is that your spending will almost certainly fluctuate.

For example, in the first few years of retirement, you may find your expenditure is elevated as you embrace your freedom. Perhaps you want to relocate or retire abroad and buy a new home or keep your family home as a base and spend time travelling and exploring abroad.

Then, as your energy starts to dip, you may find that you’re happy to spend time pottering around closer to home. You may still enjoy the odd holiday and weekend away, but long-haul travel may become less alluring. As such, your spending is likely to decrease.

Later still, as you age, you’ll need to consider how you might pay for some home help or later-life care.

Read more: Planning your retirement budget? 5 important questions to ask

With so much to consider and plan for, it can help to speak to a financial planner. A professional will talk to you about your hopes and desires and then help you devise a financial plan designed to deliver the income stream you need to support your dreams.

4. Speak to a financial planner to ensure you can create a sustainable income

Adjusting your mindset will also be necessary as you begin to switch away from saving and start to spend your accumulated wealth.

While tax-efficient accumulation helps enhance your wealth for the retirement you desire, tax-efficient decumulation helps preserve your capital and increases the chance of having money to leave to your loved ones.

Working with a financial planner can help ensure that you draw a tax-efficient income from your pension and other assets.

Read more: Why advice is vital when you start to spend your wealth in retirement

Though you may consider your pension as the foundation of your retirement plan, if you have other income that you can use more tax-efficiently, it may be prudent to defer drawing on your pension.

Since pension funds often benefit from tax-free growth, leaving your pension invested can be particularly useful for maintaining capital value. Plus, in the UK, pension funds aren’t usually subject to IHT. So, leaving your pension fund intact while drawing on other investments may help to reduce your IHT liability.

As such, if you have excess cash on hand – that doesn’t form part of your emergency fund – consider using this before you start making withdrawals from your pension.

Drawing from your pension should be done with care. When markets are volatile, selling at the wrong time could leave you with less to spend than you had hoped. As such, using excess cash allows you to leave funds invested, which may provide enough time for funds to recover any lost value.

Get in touch

If you’d like to talk to us about your ideas for retirement and developing a healthy mindset, please get in touch. We can work with you to create a financial plan that suits your goals and gives you the confidence to use the assets you’ve built up during your working life.

Email or give us a call on +44 1689 493455.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.  

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Past performance is not a guide to future performance and should not be relied upon.

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