Looking at your opportunities to 'unretire'
Have you heard of the word ‘unretire'? It's this year's new buzzword, in the world of money. But when you think about it, it's a case of ‘old wine in new bottles.'
Since this year's lockdown has meant we may have sat at home twiddling our thumbs for a while, we can probably understand.
You ‘unretire' when you go back to work after you officially retired.
It means that a growing number of people are going back to work, having spent a while in the world of retirement when, let's face it, you have to sit around twiddling your thumbs at home. I hear the first two weeks are grand, but your body alarm still goes off at 6am and after that, there's only so much breakfast TV and Columbo re-runs you can stick.
This is what makes good financial planning so important.
In plain words, the purpose of financial planning is to ensure you don't end up skint. It is also about having choices, including the choice not to work any longer than you want to. Have you heard the phrase ‘trapped in the workplace'? It's the silent pandemic.
Now it's time for some juicy numbers. I love this bit. (Did I ever tell you my calculator cost more than my car?)
The Office for National Statistics (ONS) says the percentage of people working past retirement age has doubled in the last 20 years. Part of the reason is because we are able to. We are fitter and healthier than ever before, and as the new generation of the ‘wellderly' we can expect to live into our mid-80s these days, compared to our early 60s a century ago.
New research by Which? magazine shows that most of us carry on working because we want to. In fact, just over half of us say that we do it for mental stimulation (sorry, Columbo), and a good few more of us say we do it for social contact.
However, there are also 45 per cent who say it's to supplement retirement income. ‘Supplement retirement income' – a polite phrase that hides a multitude. Most of these are the folks who simply can't retire yet – those who feel trapped in the workplace.
What nobody realises is that there is going to be a hidden knock-on effect for our children. In the past, we have waxed lyrical in this column about the critical social role of Bomad – the ‘Bank of Mum and Dad'.
The London School of Economics (LSE) said this year that the collective mums and dads across the UK make up the sixth-biggest mortgage lender in the country, handing out a massive £6bn in loans or gifts last year.
They were also the most understanding bank, approving almost all loan applications, and not complaining when most are never repaid. First home deposits were the main thing, and the average Bomad contribution outside of London was £24,100.
If mum and dad are finding themselves short of cash now, it will be a source of emotional stress all round, but will also increase the debt burden on the next generation. That is the knock-on effect. With large numbers now approaching a retirement they can't afford, there is a risk that they can't help out their children as much as they would like, and the next generation of ‘grey collar workers' will have to work on longer than they'd planned.
The opportunities to unretire are going to be fewer in the post-Covid future. It is one of the tragic facts that there may be less businesses around, especially small businesses.
All of this makes it more important to know what you can expect in retirement. These are not easy times, and the aftershock will be felt for years.
Now, not everybody has the means to build up a more substantial pension by making additional voluntary contributions, but that's just one of the options to be considered.
The important thing is to find out what the options are, and to think now.
The very fact that you are reading this page shows that you are financially aware. But that has to translate into action.
It could mean that if you do unretire, it will be by choice, and not because you have to.
:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com