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Daniel Wiltshire: Why I am talking my clients out of post-pandemic early retirement

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Illustration by Dan Murrell

It has become very clear that, even now lockdown is lifting in the UK, the pandemic will leave a lasting impact on society.

Some of these changes are widely acknowledged, such as the endless debate about working from home or the accompanying trend of people leaving the cities to live in the countryside.

But there are other — potentially even longer lasting — lockdown-induced changes that do not receive as much press attention.

Over the past few months, I have had a significant increase in enquiries from people who are reassessing their lives and wondering whether they can face going back to the daily grind as things become more and more normal. In particular, clients in their 50s and early 60s want to determine whether they can afford to retire early.

Do you really want to retire early?

Big life decisions are understandable given the year we have just had, but I wonder if some people are acting in haste.

For advisers, it is very easy to fall into the trap of accepting retirement (and, in particular, early retirement) as an unquestionably positive thing — the point at which we can free ourselves from the shackles of labour and live life as we wish.

But experience has taught me to question this assumption. Every successful person I have ever met hates the idea of not working. As one extremely wealthy acquaintance in his 70s puts it: “I’m rewired, not retired!”

It is very common for early retirees to re-enter the workforce after a couple of years due to boredom

For many people, finishing work can be a very difficult psychological adjustment to make, particularly for those who still have the energy and enthusiasm to contribute to the workplace.

Indeed, it is really very common for early retirees to re-enter the workforce after a couple of years due to boredom.

Increased life expectancy

And this is the point. Today’s 65-year-olds are ‘younger’ than previous generations, both mentally and physically.

For the past two centuries, life expectancy has increased by around three years every decade, meaning that the average retiree can expect to spend around 20 years in retirement.

Compare this to 1908 when chancellor of the exchequer — and subsequent prime minister — David Lloyd George introduced a payment of five shillings a week for poor men who had reached the age of 70. Back then, Britons (especially poor ones) were lucky to reach 60.

But traditional notions and expectations of age persist.

The death of retirement

So, how can people ‘retire well’ in the wake of the pandemic?

In their book, The 100-Year Life, psychologist Lynda Gratton and economist Andrew Scott suggest that society will gradually move away from the traditional, rigid, three-stage life of education, work and retirement towards a more flexible, multi-stage life, where people can explore different careers and ways of living.

This approach will enable people to remain engaged with their work for longer, which, in turn, will help fund their (delayed) retirement in old age.

To some extent, this was happening already — it is now much more common for people to reduce their hours or take on part-time consultancy-type jobs rather than stop work completely at retirement age.

But I believe this trend has been accelerated by the events of the past year.

How can advisers respond?

Regardless of whether a client can afford to retire early, I increasingly find myself encouraging them to consider whether total, permanent retirement is right for them. A phased or multi-stage retirement may be healthier and more financially viable. Indeed, there is evidence to suggest that, counter-intuitively, those who retire later live longer.

While more problematic for advisers (it is much easier to reduce the retirement equation to a function of age and pension value), it is clear to me that a more flexible approach — where clients are guided towards a lifestyle rather than a number — is what is necessary post pandemic.

This will mean that conversations become more nuanced and retirement strategies more complex. In short, more work.

But it is another opportunity for financial planners to prove their worth and make a difference to clients’ lives as well as their bank balances.

Daniel Wiltshire is an independent financial planner at Wiltshire Wealth