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Money & Rights

The best years of your life

what makes a happy retirement? Marianne Curphey has the answers

A new study has found that a successful and enjoyable life after work requires a focus both on good financial habits and a healthy lifestyle.

The research, by Aegon, emphasises that achieving retirement aspirations requires more than saving, investing and planning- it also depends on staying in good health.

The study found that it was as important to take steps towards maintaining physical well being as it was to nurture healthy finances, yet noted few people plan effectively to keep fit.

Forward Planning

The dream of an active retirement is shared by many people, but relatively few are taking steps to safeguard their health or manage their finances effectively. In fact, the research discovered that there was a worrying disconnect between people's good intentions and their actions. 

While people might be aware of the need to plan ahead in their 50s and 60s in financial terms, few have a strategy for how they are going to stay fit and active. Yet research shows that physical activity and training improve both physical and mental abilities, and may have a protective effect against cognitive decline and dementia in later life.

Staying fit and healthy

A study by Patrick Gejewski and Michael Falkenstein in 2016 concluded that physical activity was related ti brain changes and led to enhances cognitive functions for older people. They said the best combination was keeping your brain and your body active and to make regular demands on both.

The authors concluded combined programmes of physical activity- embracing aerobic and co-ordination training at the same time- were the most favourable. One of the activities found to have the greatest impact was dancing because it demanded physical,  co-ordination and cognitive functions, they said.

The good news form the study is that physical activity can preserve and even improve physical and mental fitness in advanced age and it doesn't need to be high impact.

Finding a passion

It's easier to stick to a regular exercise programme id it's enjoyable and something you look forward to. You don;t need o join a gym, but joining an orchestra, choir, walking group or dance session will give you a chance to make new friends and keep your brain and body active.

Your local library or community centre will have details of classes and groups, and it you're feeling nervous about going for the first time, you could recruit a friends to go with you. Many gyms have daytime classes for older people which concentrate on mobility and stretching, and are lower impact than the more traditional aerobic sessions. Disciplines such as Tai Chi and yoga can increase flexibility and develop breath control and mental awareness.

Waling is one of the most effective exercises for weight loss, especially in women and those ages 50 plus, according to research by the London School of Economics.

Health and wealth: the connection

The Aegon survey found that people who were in good health had a more positive financial outlook than those in fair or poor health; yet it found that only 35 percent of people in the UK took their health seriously bu getting into good habits and only 40 percent considered their long term health when making lifestyle choices.

  •  Only 35 percent of people currently take their health seriously by carrying out regular self checks or having routine medical check ups.
  • Overall, 46 percent don't exercise regularly and 44 percent indulge in harmful behaviours such as drinking too much or smoking.

Steven Cameron, pensions director at Aegon, said: "Retirement planning has traditionally focused on finances, without sufficient consideration of health, A successful retirement requires maintaining good health and being financially secure. However, many people are failing to prepare in ways that can increase their likelihood of success.

"Health has the potential to have a major impact on people's retirement plans. for example, when taking the decision about when to stop working and enter retirement, the timing is often dictated by health factors."

Budgeting: the key to success

According to figures from the Prudential, someone stopping work this year can expect to receive income of around £18,100 which is £400 more than in 2016 but still below the 2008 peak of £18,700. the low point for incomes was for those who retired in 2013 on an average of just £15,300 a year. Prudential also found, however, that nearly half of retirees had felt that they were financially unprepared to stop work.

The key to ensuring you have enough money to meet your retirement needs is to have a financial plan and think about how your spending needs will change during the difficult stages of retirement, says Philip Pearson, independent financial adviser with P&P Invest in Southampton.

"Have a budget plan for spending which you stick to," he explains.. "You might need to keep a diary and record every day each transaction that you make- form your morning coffee to direct debits and credit cards."

Knowing your priorities

Retirement is about choices- how to spend your time, your money and your talents. It's important to think through what gives you the greatest and longest-lasting satisfaction, says Simonne Gnesses, money coach and founder of Wise Monkey Financial Coaching.

Making the most of your life is not just about spending, although having enough money gives you more choices. It's also helpful to consider what makes you happy, so you can prioritise your spending and not give into impulse buying.

"When it comes to impulse buying, some people are better at controlling themselves that others." she explains. "It comes down to how capable we are at managing our emotions.

Emotional management is the key to financial management. If you are more in charge of your underlying emotions, you are less likely to spend when it is unplanned or unnecessary."

She says that if you know what  you give in to impulse buying,, you could think about what barriers you could put in your way to make it more difficult for you to spend at times when you have not given it much thought.

"If we want ti stoop impulse buying,, we need strategies to help us, so we spend money on things that matter to us, not things that lose their appeal within days of purchase."

How to control spending:

  • Being fully aware of your habits
  • Writing down what you spend and what you are feeling before you spend
  • Unsubscribing from email marketing from shops and discount sites so you are not tempted with special offers
  • Creating a barrier between the stimulus to buy, and your response

"Although changing your habits and behaviours is one layer beneath the tip of the iceberg, if you want to make lasing changes you need to look deeper at what drives you," she says.

Bear in mind that simple pleasures can be satisfying, too. "It is not always in extraordinary adventures that we find the magic- sometimes it is in ordinary life where the magic happens."

you could make a wish list of the top ten things you want to fo, visit or achieve in etirement, and then make a plan to help you do those things. It will help you focus on how to spend money on what's really important.

Once  you have a finacial plan, make sure to review it regularly to ensure you ar on target. Annual trackers and forecasts are available for all pension plans, making it easier to monitor your savings.

Take care over drawdown

More people are opting for drawdown pensions, which allow hem to withdraw as much money as they wish from their pension pt, but few are taking advice, the City regulator has warned.

The Financial Conduct Authority (FCA) is so concerned about this that it is currently investigating the market for drawdown, use of which is now double that of annuities, which provide and income for life. The FCA's early findings confirm more than half od pots accessed have been fully withdrawn.

Richard Eagling, head of pensions at Moneyfacts, the money information site, said there was a danger that people could exhaust their funds prematurely.

"While income drawdown offers far greater flexibility  than an annuity, it requires monitoring to ensure that withdrawals are sustainable, and transfers the longevity risk ono the individual."

There is also the danger that people might end up paying more tax than they need to. You're allowed to take 25 percent of your pension fund as a tax free lump sum. Anything over that is taxed at your marginal rate. If you cash in the whole of a pension, even if it is worth only a few thousand pounds, you could be paying unnecessary tax on 75 percent of it.

Fund management company Fidelity conducted a survey to discover what people did with the cash lump sum from their pensions. Although some paid off existing debt or spent it on a holiday the most popular choice by far was stashing money away in a current account, with more than 40 percent choosing this option.

This is unlikely to be the best option. With interest rates so low, retirees could see the real spending power of the money eroded owing to the effects of inflation, Fidelity says. By being too cautious they could see only small returns for their money.

Maike Currie, investment director at Fidelity, says a healthy 55 year old could live for up to another 40 years, and suggested bonds issued by companies or stocks and shares might be a better home for cash. "Putting this money into a stacks and shares Individual Savings Account (Isa) will also protect future income payments and capital growth from the tax man.

"our calculations show if you had invested £15,000 into the FTSE. All Share index five years ago, you would now be left with £23,288. If, however you had invested £15,000 into the average UK savings account over the same period, you would be left with £15,122."

 

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