Preparing for retirement
Dreaming about retirement is good, preparing for it is better !
Dreaming is easy…
Sleeping in every day, discover exotic countries, pursue one’s passion for the piano or photography, finally get to reading the pile of books that has been steadily building up and spend time with the (grand)children. It is very easy to imagine the dream retirement. But one has to be able to afford it. It is therefore important to anticipate, and to anticipate early ! When the time comes to retire, it will be too late !
Indeed, if many idealise life after their professional careers, few take the time to think about let alone truly study the topic at the beginning of their working lives. Nearly half of the active population aged 50 or more affirm that they believe they started saving for their retirement too late. To avoid being trapped, it is therefore advisable to ask yourself a few pertinent questions on your future lifestyle, the answers to which will help you determine the savings you will have to constitute : will you travel frequently ? Will you keep your residence, or will you downsize, once the children will have left the house ? What kind of medical coverage do you aspire to ?
Whilst we acknowledge that every individual is different, we wish to hereby share a few useful and relevant perspectives to help you optimally prepare for your retirement.
How would you like to live in retirement? The question may appear simple, but your answer to it will materially influence your savings strategy. Significant progress in medicine and our generally healthier lifestyles allow us to live longer lives, and, equally importantly, to be in good physical shape for numerous years in retirement. It is therefore perfectly understandable that today many envisage an active and diverse life in retirement, which can include costly hobbies such as sailing or discovering far-away countries. It is important to include such objectives in your budgetary planning.
In France, we are fortunate to live in a country in which doctors are amongst the best in the world and the medical coverage system is outstanding. Nonetheless, the cost of medical treatments is rising, and the Social Security does not always cover the full medical expenses (practically speaking, the long term trend is for social coverage to decline). It is therefore well worth incorporating this evolution in your calculations, understanding that recourse to medical services tends to statistically increase with age.
Move to a smaller place
Moving to a smaller residence can certainly reduce your annual budget meaningfully, thanks to a decline in monthly mortgage repayments and/or in running costs. But don’t forget to take the cost of moving house and possible refurbishments into account. And it can also be very enjoyable to host family from time to time!
Do you currently contribute to your children’s budgets or do you finance part of your grand-children’s studies? Even though it can be a tough conversation to have with close relatives, to cut down on some of these expenses, before you retire. And if certain family members truly depend on your financial aid, you need to take this expense into account in your retirement budget.
A (partial) professional activity
A good number of you want to keep a link with the professional world, or - after a well-deserved clean break with it - want to return to it in a different capacity, for example, by assisting businesses for example as a consultant or as non-executive director. Such activities can of course generate some very appreciable extra income. Pursuing such activities can and should be prepared for, and can be structured for example by setting up a specific corporate entity in advance.
A financially comfortable retirement…
… can be prepared from the very early stages of your professional career onwards. No need to spend a lot of time on it, but to get the thought process going early allows you to anticipate. It is by planning early that you will realize that you may have to work for a little bit longer, save more regularly, or reimburse loans more rapidly. It is by being methodical that you will achieve your financial objectives.
The good news is that assistance is available to help you in this process. Several types of experts, such as private bankers, financial advisers and notaries can provide professional assistance and advice. Finally, certain digital tools exist, such our application Cashbee, specifically designed to help you put money aside in a simple and secure manner, and taking your specific financial profile and savings capacity into account.