For most people that we see, there is a golden decade between ages 55 and 65 or there abouts.
The first breakthrough should be getting rid of the kids financially, if you have them. I am never fully convinced that children ever completely leave the family profit & loss accounts but hopefully it at least eases. Whether you do or not, this is hopefully also the time when the mortgage gets fully repaid. A milestone that many people describe as an amazing feeling (better than weddings, own or children’s).
This should free up some spare income that can be saved and this period often coincides with people ramping up their pension contributions or finally finding spare cash for ISAs.
It is also during this period that inheritances might start to arrive from parents or, if you are lucky, that aunt or uncle who never married. This is the period of most powerful tax planning. Inheritances can be varied into a Deed of Variation trust for immediate exemption from inheritance tax IHT (whilst retaining access)as we explore here. Any surplus income can be gifted to a Surplus Income Trust, again for immediate exemption from IHTas we explain here.
It can be a time of abundance, and the best period so far for securing your own retirement.
Planning in this period is crucial, as the temptation can be to increase spending or even move, just at the time when crucial decision making can have a huge impact on the future.
As with everything in life it is important to have balance between spending and saving. A future cashflow plan can look at various scenarios to establish the trade-offs. If I don’t spend ‘x’ on this, I will be able to retire ‘y’ earlier.
Our favourite economist, Tim Harford, always says that every ‘yes’ also has an equivalent but quieter ‘no’ whispered elsewhere.
A ‘yes’ to working that extra year is also a subtle ‘no’ to our spouse or children. The ‘yes’ to a new car is a unconscious ‘no’ to something else, that someone else in the family wants or needs. It might even be a ‘no’ to our future self and their happiness.
Most decisions we make involve a series of tradeoffs and provided we understand these we can make better decisions.
We have been planning clients’ Golden Decade with them for decades ourselves, from our Hampshire office and across the UK.
