The Retirement Newsletter: What will be your type of retirement?
Issue Number: -126 — looking at different lifestyles in retirement
Welcome
In this week’s newsletter, I will start looking at the different levels of retirement we want or can expect.
I will also tell you about a chat I had with a friend who has recently retired. I wanted to find out how things were going and if he had any words of wisdom for me.
Planning
In the last newsletter (Money — how much do I need to retire?) I introduced the idea of three potential levels of retirement:
Essential — what is the minimum amount of money you need to survive? To live? To get by? Not the most comfortable way to be retired, but at least you can be retired and have some freedom, albeit limited by money
Moderate — a comfortable retirement. A retirement where you are not overly limited by money. A retirement where you can travel and do things you want to do.
Luxury — a retirement where money isn't a serious concern. You can't go mad, but you can afford some very nice holidays and have a very comfortable lifestyle.
But what do I mean by these?
Well, the exact definitions are up to you — it all depends on your present lifestyle and the lifestyle you wish to have once you have retired.
For me, the definitions are as follows:
Essential
The essential level is the most basic level and represents the core elements of living and includes:
Food — everyday living, food on the table.
Gas/Water/Electricity — heating, cooking, and lighting.
Gifts and Charity — limited gifts and monetary contributions to charity. Although you might contribute to charity through volunteering.
Health — off-prescription medicines, treatments, etc., and in some countries, medical insurance.
Hobbies — limited hobbies. Something simple. Something cheap.
Household goods — cleaning products, general everyday household items.
Holidays — once a year, and within the country.
Housing payments — local government taxes, house repairs, etc.
Insurance — house insurance and belongs, medical, but unlikely to be for a car.
Clothes — replacement clothes.
Transport — public transport, occasional car hire for special occasions, but not owning a car.
Moderate
A moderate retirement would be all the 'essential' items, plus.
Food — with occasional dining out.
Gas/Water/Electricity — no significant change from above, but with no worries about heating during the winter.
Gifts and Charity — a higher level of gift-giving, and you may donate more than your time to charities.
Health — as above.
Hobbies — a more comprehensive range of hobbies and interests compared to the 'Essential' plan. Some classes and residential courses.
Holidays — once a year abroad and mini-breaks within your country.
Household goods — as above.
Housing payments — as above.
Insurance — as above, but may include a car, plus medical and travel insurance for trips abroad.
Clothes — as above, plus some occasional 'luxury' items.
Transport — some public transport, and you own a small car.
Luxury
I would define a luxury retirement as all the above for ‘Moderate’ plus:
Food — more frequent trips to restaurants.
Hobbies — significant hobbies and attending classes and residential courses.
Holidays — travelling abroad at least once a year for a significant holiday and with mini-breaks in your country and overseas.
Transport — a new car every few years.
Other — what have I missed?
And, of course, there are things above that you may include, such as pets or continuing to financially support your kids. Or, you may still be carrying a mortgage.
If I have missed anything obvious, please let me know.
How much will all this cost?
The cost is an interesting question, and I will start looking at that in later newsletters.
A Chat about retirement
Back in newsletter -131 — The Retirement Newsletter: What do I need to do to retire? I wrote about a good friend of mine, who I have known for over 40 years (we went to school together), who had retired.
As I said in the newsletter, I was happy for him — he had been planning his retirement for the last seven years. His plans had worked. He had retired.
I was envious of him — I want to retire.
I was worried about him — what is he going to do?
Last week I met up with him for a beer and a chat to see how his retirement was going, and he had some interesting things to say:
Money
I asked him about money. Did he feel he had enough to retire? And his response surprised me.
“I don't know. I think so. I have worked out all my' pension pots' and have a good handle on what I will have coming in and what, I believe, will be going out. Time will tell. The first year will be 'financially finding my feet. My financial advisor thinks it is doable.”
The one bit of advice he gave me on money was — and this is not the first time I have heard this — consult a financial advisor. He found that talking to a financial advisor helped merge his pension pots and avoid nasty tax surprises.
What next?
I asked, “Now that you are retired, what are you going to do with your time?”
Again, the reply surprised me… “Don't know”.
I pushed a little more on this, and he talked about 'decompressing', that is, taking some time to get over the nine-to-five job and to give himself the space to find out what he wants to do next. As he said, “I am not rushing into any significant changes just yet” — a good point.
I was expecting some lofty plans. I was hoping to hear about travel plans and doing things that he hadn't had a chance to do while working. But no, it was a case of easing into retirement and taking the time to plan the next step. It all seems rather sensible to me!
How’s it going?
Finally, I asked him how things were going. Any surprises? And, again, it was another unexpected response.
“It’s going great. It is nice to have no work-related issues, but I now find I worry about things that I haven’t been concerned about for years. I have lost the ‘cap’ of work problems that were keeping my issues at bay.”
I was expecting the ‘cap’ comment and one set of worries (work) to be replaced with a new set of worries. Let’s see how this one plays out.
In the news
News like this makes you stop and think:
Sean Lock obituary — Guardian Newspaper, UK
Sean was a well-known standup comedian in the UK, and I have listened to him many times on TV and radio panel shows. A very funny man. And, sadly, he has died of cancer at the age of 58. Nothing, fifty-eight is nothing.
As I said, it makes you stop and think.
Useful links
UK Government Website — How to avoid pension scams
Next week
Next week, I will get into the money a bit more and look at how much the essential, moderate, and luxury retirements could cost.
Thanks
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Until next time,
Nick
PS, If you have something you would like to contribute to the newsletter — a story, advice, anything — please get in touch.
Please note: I am not a financial advisor. When I am writing about money and financial matters, it is based on things I have read about money and about preparing to retire. IT IS NOT FINANCIAL ADVICE.