Statistics suggest that financial planning can significantly improve your quality of life in retirement. Indeed, 96% of people that worked with a financial planner said they were happy in retirement. The figure drops to 72% among those who didn’t plan.
These finding were revealed in a new study from Standard Life, which explored the different ways that planning allows you to get the most out of retirement and enjoy it for longer.
The research found that those who worked with a financial planner believed they could retire an average of three years earlier than those who didn’t. As well as retiring earlier, those people also tend to be more comfortable and content in retirement.
This is because whether you have already retired or you are still in work, financial planning offers several key benefits.
Here are just some of the reasons why people who consult with a financial planner are likely to enjoy their retirement more.
1. Create a plan that fits your lifestyle goals
When people think about retirement planning, they tend to picture somebody giving you advice about investments and pensions, and helping you find ways to grow your wealth as much as possible before you hit retirement age.
Although these things are a crucial part of what a financial planner does, retirement planning is ultimately about making sure that you are happy, and you can live the lifestyle you want. That’s why your overall goals are often the best starting point when creating a financial plan.
When you work with a financial planner, as well as discussing your spending habits, the most crucial element they want to understand are your life goals and aspirations. This could include your plans for how you wish to spend your retirement, and the inheritance that you want to leave your family. With this critical knowledge, a planner will then create a bespoke financial plan to meet your lifestyle goals.
2. Fund your retirement for longer
Once you have discussed lifestyle goals, a financial planner can estimate what your financial needs will be, how much you need to save and what you can realistically spend in retirement.
This is an important step because it helps to ensure that you can sustain your lifestyle without making sacrifices.
The study from Standard Life showed that 48% of people who took advice go on to write a detailed spending plan for retirement compared with just 18% of those who didn’t take advice. As a result, people who took advice expected to fund their retirement for 23 years. Meanwhile, those who failed to take advice expected to fund their retirement for just 17 years.
3. Use cashflow planning to prepare for change
Life can be unpredictable and if you face unexpected expenses or changes to your circumstances, it could put pressure on your finances during retirement. Fortunately, working with a financial planner can help you develop a retirement plan that takes different scenarios into account, allowing you to more easily adapt to change – at least financially.
In order to do this, financial planners will often use cashflow planning. This method for mapping out your financial future can be used to “rehearse” different scenarios and see how certain changes could affect your income in retirement.
One important scenario that cashflow planning can help you prepare for is the possibility of needing care in later life.
According to Age UK, the average price of a residential care home is£600 a week and a nursing home is £800 a week, so you may want to consider whether you will be able to absorb this cost.
Read more: 3 practical steps when planning for later-life care costs
Additionally, cashflow planning can help illustrate how adapting your retirement goals could affect you. This includes things like:
The foresight offered by financial planners using cashflow modelling could give you flexibility in retirement while ensuring that you are still financially secure.
4. Give yourself peace of mind and reduce financial stress
Financial stress can make it more difficult to enjoy your retirement and you may find yourself foregoing luxuries like travel or eating out because you are concerned about the cost. Additionally, a lack of security could also affect your mental wellbeing.
The good news is that working with an experienced planner could give you peace of mind and alleviate any concerns you may have.
This is illustrated by a report from Royal London, which found that 63% of people who had worked with a financial adviser said they felt financially secure and stable, compared with only 48% of people who hadn’t taken advice. Similarly, 41% of non-advised people said they often felt anxious about their household finances.
This stress is likely reduced when you work with a planner to assess your lifestyle goals and create a clear retirement plan that can adapt to change, if necessary.
Get in touch
To find out more about how you could benefit from financial planning and ensure that your retirement is happy and healthy, please get in touch.
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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 fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.