You have a financial plan, but do you have a financial plan b?
“The best laid schemes o’ mice an’ men, gang aft agley”. So said Robert Burns in his poem ‘To a Mouse’, lyrically summing up the idea that no matter how well we prepare, there are always factors beyond our control that can cause our ‘best laid’ plans to unravel. Whilst the same can be said for financial planning, there are a great deal of factors that are under our control, one of which is preparing for the eventuality that our plan ‘A’ might not come to pass. Making a plan ‘B’ is not admitting defeat, but pragmatically working on the assumption that nothing about preparing for the future is guaranteed.
When it comes to retirement planning, too many people give themselves a single plan without having an alternative they can turn to. This is most common amongst those who have made plans themselves without consulting an independent adviser. One of the most frequent mistakes made is planning for too short a retirement. It’s always better to be optimistic about how long your pension will need to last. That way, if you overestimate, your money won’t run out and can become part of your legacy.
An increasing number of retirees are planning to continue working in some capacity after they retire, either taking on a part time job or extending their previous career through taking on a consultancy role. Financial advisers, however, are increasingly recommending that any income from working in retirement should be factored in as additional income rather than something you rely on to ensure you have enough money each month. That way you have the freedom to reduce your hours or stop working altogether whenever you want.
Plan ‘B’ is not always about the worst case scenario, however. It could be that your main plan assumes a certain amount of savings in your pension, whilst your backup plan is more optimistic but less likely. If you find that you do reach retirement age with more money available than you expected, plan ‘B’ could be your way of ensuring you make the most of life after work. If you planned to move abroad, look at more expensive destinations that might offer you even greater benefits than your initial choice.
If you’re nearing retirement and would like help putting together your plans, please get in touch with us directly for further guidance.