In this week's blog: What we get wrong about retirement
"I’m really going to miss them…"
My friend’s son, in his late 20s, was preparing to move abroad with his young family – and my friend was finding it hard to deal with the enforced separation.
“I grew up with loads of cousins around me, and even though I moved to London in my 20s, the whole family stayed close,” he told me. “We were together every Christmas and on many special occasions – I can’t imagine seeing my grandkids just once a year!
“It feels all wrong.”
I tried to remind him that in today’s globalised economy, it’s normal for families to live in different countries and that many of our friends see their children and grandchildren mainly on Facetime.
But while my friend accepted that in theory, he still found it hard to wrap his head around what this would mean for him.
You see, all too often, the norms we grew up with continue to feel ‘right’ to us, even though the world has moved on.
It happens in the workplace, too… I’m thinking of one particular area where employees’ expectations are routinely stuck in the past.
I’m talking, of course, of retirement and pensions.
If you ask most people to describe what their retirement is going to look like, I’m willing to bet they’ll paint a very classic picture….
They imagine that there will come a point – perhaps around 65, maybe a little later – where they will drop all their work commitments in one go.
Maybe their company will throw a big goodbye party for them, with some lovely speeches about their contribution and how much they’re going to be missed…
And then once the euphoria of their newfound freedom has passed, they’ll settle down to a routine of happily pottering around the house, enjoying the odd holiday, taking up some new hobbies and maybe taking a class or two.
It’s what we call a “cliff-edge” retirement, where work stops in one go.
And whilst that’s the way it used to work, it’s becoming increasingly unusual as we live for longer and need to fund lengthier retirements.
Nowadays, it’s more likely that you – and your staff – will gently glide into retirement, reducing your hours at work over several years or maybe taking up much more flexible work patterns…
…and then continuing to do some sort of work well past traditional retirement age, either because you can’t afford to live on your pension alone, or because you feel too young (and too bored) to give up work entirely.
Now, most of us know – rationally – that’s the trend. We’ve all seen colleagues retire in this exact way.
Yet we continue to imagine that we’ll retire the way our grandparents and parents did.
Over the past few weeks, I’ve been talking about the areas we (and our employees) need to think about in our 50s, in order to set ourselves up for success throughout that decade, and into our 60s.
I recommended pulling together a plan for building wealth, for maintaining and improving health, and for taking control of your career.
The fourth area you need to consider is pensions.
Shifting our mindset from “cliff edge” to “gradual retirement” is one of the biggest challenges, both as individuals and as employers.
We need to start thinking more realistically about what our retirement will look like, in order to make more useful plans and to save for our pensions in a more sensible way.
After all, if you – or your staff member – are not going to retire in one fell swoop at 65, this will affect how much money you have to save, how you might prioritise your pension pot versus other investment options or even clearing debt, as well as how and when you access your pension.
It could change everything!
Here are the kinds of issues to consider:
>> At what age do you think you might like to reduce your working hours?
>> Can you fund a full retirement, or will you have to continue working long past traditional retirement age?
>> Once you are past traditional retirement age, how much time will you want to spend at home vs going out to work?
>> What other activities might you like to take up during retirement, and what other responsibilities might you have to shoulder?
Once you have answers to these questions, you can start developing a structured plan to make the retirement you want – and can afford – happen.
Of course, your plans might change as you get closer to retirement, but the very act of planning will force you to think through key issues, and leave you better prepared. You can adjust as you go along.
And the same, of course, applies to your staff members.