There is plenty of research that shows that age 75 is the average age at which our horizons narrow.
This is crucial to how you plan your retirement and how we, as financial planners, work with you in retirement.
The change at 75 tends to manifest itself as a feeling that travel (particularly overseas) is becoming more stressful, everyday tasks are taking longer and a general feeling that it is preferable to stay at home rather than venturing out.
The reason why this is important is that it can herald a complete change in discretionary spending. The early years of retirement are often called the go-go years, the middle years the slow-go years and the period after 75 as the no-go years. Whilst core expenditure doesn’t tend to vary, council tax, utilities etc, discretionary spend often shrinks substantially post-75. If a large proportion of your total spending is discretionary then this can see a large drop in spending.
Most people try to plan their draw on their capital in retirement, on the assumption that their retirement spending will be flat. For these people there is a significant risk that not understanding the change at 75 leaves them with far too much money at the end of life.
This might seem like a nice problem to have, but it means two things. Firstly, they have not spent or gifted money in the first half of their retirement and missed out on multiple chances at joy along the way. Secondly, they are leaving an unnecessarily large inheritance tax liability for their heirs. It is common that we find ourselves working with clients post-75 to ‘get rid’ of surplus capital, when a less stressful approach would have been one of more spending, giving and fun, earlier on.
I have spent decades warning clients about the problem of age 75 and in most cases, they haven’t believed me. As I have had the pleasure of working for 20 plus years with many clients, I have also had multiple cases of clients saying:
“I know you told me that this would happen at 75, but I didn’t believe you. I was shocked at how quickly the change came about when I turned that age.”
Of course, as with most averages, there will be plenty of people who hit this change before 75 and plenty who hit this change much later. We can all quote the individual, like one of my relatives, who is playing walking football at county level aged 80. However, averages are useful when we don’t have any other specific individual data.
If you would like to discuss your retirement planning with one of our advisers, please contact our Hook, Hampshire office to speak to one of us. We are currently planning people’s retirements throughout the UK.