Well… I bet you weren’t expecting a headline like that!
Some people might think it’s cruel or unfair, to talk about people dying, or that I’m being deliberately provocative.
But it’s something that I feel NEEDS to be talked about, openly and honestly, because of something I’m seeing time and time again with clients that I meet.
It’s fair to say that many of us are part of that generation whose parents owned their own home, maybe for the first time, which rose dramatically in value over a few decades. Perhaps they benefitted from a final salary pension or those share deals when organisations were made public. Basically, they have some assets, and potentially quite valuable ones.
But there’s NO guarantee that when they die, we are going to get those assets or see that money!
A couple of years ago, I had a few people book appointments with me to chat about remortgaging an interest-only mortgage.
An interest-only mortgage is where you pay the interest each month, but at the end of the 15 or 25 year term, you still owe the whole amount of money to the bank because you’ve not been paying it off bit by bit, like you do with a repayment mortgage.
And in all these cases – trying to be as kind and tactful as I can! – the question I’ve had to ask the client is really, how did you think you were going to pay this lump sum off?
Because there’s no savings plan in place. There’s no money sitting in a pension. There’s no other assets that can be sold to raise the cash.
And the answers that I got were a variation on “well, I never thought my mother would live to be 94!”.
Without wishing to sound heartless, it’s very risky to wait for a parent to die, to get an inheritance and pay off a mortgage.
The reason I’m talking about this today is in the context of retirement. People often tell me that they’re not looking to pay into pensions or ISAs or investments for their future, because their home is their pension, or they will inherit money from their parents.
Both of these strategies have their own risks, so let’s look at them one by one.
Firstly, your home being your pension. Yes, it’s true that when you want to work less or stop altogether you could sell your house, buy somewhere smaller and use the proceeds to live off in your retirement.
But it does leave you with a couple of problems. None of us knows how we’re going feel, 10 or 20 or 30 years from now. We don’t know what life is going to bring in the meantime.
There might not be anywhere else in the area you want to live, where you can buy a property for that amount of money. You might not want to move to a cheaper area, away from your friends, your family, your social life and your support network. You might not want a smaller house, without space for the grandkids to stay. And let’s be honest – moving is stressful. You might love your home and all the memories there. It’d be awful to have to leave it when you’re older, if you really don’t want to.
Plus if you do need to retire quickly – maybe through ill health or a change of circumstances – you can’t access the money quickly. You need to wait for the house to be sold, which as we all know, can take months and months. Who knows what the state of the economy and property market might be, when the time comes.
The second strategy, banking on some future inheritance, brings its own risks too.
People are living longer – we all know that! – but there’s also no guarantee that you will end up with as much as you think, or even anything at all.
Increasingly, as parents live longer, they spend more of it. They’re fitter and more active than maybe their parents were at that age, so they travel more and do more things.
Some or all of their money might be needed for care home fees. According to carehome.co.uk, at the time of writing, the average cost of residential care in the UK is £60,320 a year and nursing home care £73,320 a year. Specialised dementia care is even more. It’s easy to see how their assets or savings could be diminished very quickly.
But on top of this, there’s always a chance they might remarry later in life. They might leave the money to someone else or leave it all to the local dog’s home. They might have already gifted money during their lifetime that you didn’t know about, or even have wanted to protect you from the reality of their own financial position and have much less in the kitty than you imagined.
So when it comes to retirement, we need to look at inheritance or cash from the sale of the house you live in as bonus money.
It’s money not to be relied upon, but money that is there in the background. If we get it, it’s great! If we don’t, we don’t.
So what do we do instead?
Well, instead, we create a sensible solution that works with the money we’re already making. In effect, it’s quite straightforward. We need to be spending less than we earn and then using the difference constructively to build assets that we can use at that time of life when we want to work less hard. If you need to make more money from your business now to support this, we look at ways to make it more profitable too.
This step-by-step approach to planning out your retirement is something that we do in my PATHWAY programme.
It gives you a structured system to work through, in bitesize chunks, along with live calls twice a week and the support of a brilliant community.
You’ll understand exactly what you need to do to meet your retirement goals, knowing that you have enough money for your lifetime and beyond. You’ll have the support and accountability to take action and actually DO what you need to do. You’ll have real peace of mind, getting rid of that financial stress and worry as you learn how to build assets for the future on autopilot.
We’ve had huge success with this programme and some incredible results so far.
Here’s the link again, for all the details about PATHWAY – or if you’d like to chat it through, just click here to message me personally!
Until next time,
Claire