What kind of retiree will you be?
Most people have a retirement dream, whether it be travelling the world, retiring in a popular expat destination or moving to the countryside. As everyone’s plans are different, it is unlikely that everyone’s retirement strategies are the same. One commonality is that no matter what you want in the future, it is best to start preparing for it now and always consult a qualified financial adviser about your plans and goals. Financial management for retirement requires factoring in your current lifestyle, market uncertainties, and future goals.
Types of Retirees
Broadly, retirees can be categorised into six different types. This categorisation can be helpful when laying down the groundwork for your retirement lifestyle:
1. Average Retiree
These retirees follow the general spending pattern we described earlier. They do not spend extravagantly at nearly any stage of retirement, thereby setting the benchmark to measure the other groups.
Some people choose to revive their old hobbies or finally take up the home improvement project that has been in the works. Such projects and hobbies initially require a sizeable investment. These retirees are buying tools, raw materials, spare parts, and so on. They may also participate in community development projects.
Backpacking across a country or relaxing on a cruise, travellers have already been to different places before and expect to continue doing so after retiring. With more free time, travelling expenses sharply increase post-retirement before declining in the later years. Many British expats also retire outside of the UK so that they can enjoy good weather and a cheaper cost of living. Read here our top countries to retire in.
4. Social Butterflies
This group spends on dining, hosting, and other such forms of entertainment. After early retirement participation in social events and gatherings, their spending usually declines the fastest with time.
A chunk of these retirees’ spending is in the healthcare domain in terms of insurance, medicines, or other medical services. As a result, there is no definite spike or dip in the expenditure.
5. Young Retirees
Retirees who earned early and retired early fall under this category. Following the logic that people spend more in their active years, this group also spends most in the early years of retirement. They may overlap with the travellers or social butterflies groups.
Because of their varying interests and spending habits, these retirees will have to plan for retirement with such lifestyles in mind.
Preparing for any retirement
There are a few things all retirees can do to sustain their expected retirement spending. Those whose expenditure is likely to be on the higher end can do the following:
- Part-time work: Even after retiring, you can take on part-time work that gives you flexibility and some income to supplement your retirement savings. Similarly, you can also take up freelancing gigs and work per your schedule. This can also be a way to occupy your time after retirement.
- Cutting expenses: Look at your portfolio and whether it is on track to meet its targets. If it is underperforming, you may need to cut back on some expenses while the investment recovers. Even with daily budgeting, adopting a more hands-on, proactive approach at an early stage of retirement planning can help avoid common pitfalls and errors. When dealing with your portfolio, always consult your qualified financial adviser on your decisions and queries.
- Phases of retirement: As we explained above, there can be a few phases of retirement that you may go through. Based on the category of retiree you fall under; you can plan your finances for each period such that you may have sufficient wealth in the early phase of high spending. Consequently, for early years you may look at less risky assets, whereas for later years, growth assets may be suitable.
Retirement for you may be years away but getting started on working towards it is crucial. You can tailor plans to fit the kind of retirement you want. Smooth retirement planning for you is enabled by our end-to-end services. Hoxton Capital Management’s personalised financial guidance can ensure that you retire worry-free.