Since joining this profession 30 years ago as a pensions consultant in the UK specialising in retirement planning - and now working almost entirely with British expats around the world - the same question is asked by clients, “what is enough?”.

In Short

- “What is enough?” can only be answered properly if you first address the question “enough for what?”

- Everyone has their own set of values, what is important and meaningful to them

- Your own quality of thinking through this is the first essential step

- Then the number crunching is meaningful. The plan, and any tax or investment advice can follow

- Get in touch if you want to discuss Your Future

What is enough?

This is asked in various ways. Will I be ok? How much do I need?

Often it is enveloped in practical questions about pensions, funds, tax and inheritance tax. But these are just the tools for the job.

When asked how much is needed for retirement, or financial independence, clients typically provide one of two responses:

1. A number to spend each year - whatever the number, it tends to be a rounded version of what life costs today, or something heard somewhere and held onto

2. A question back – “What is usual for people like me?”

A starting figure can be helpful. But without quality of thought, it can become the foundations of a financial plan without examining what the next thirty or forty years of your life might look like practically.

Having an appreciation of what others aim for might feel like it will help answer the question. However, people are very different. We value different things. Different people's later life plans can be – and are - wildly different.

The reason the question “what is enough?” is hard to answer thoughtfully, is because behind it sits a much harder question - “enough for what?”.

Enough for what?

This is where conversations stop being about money. It is real life, emotions, worry. It touches people's sense of identity, principles, meaning and purpose.

At a high level, work gives many of us structure, purpose, status and a full diary. Retirement removes these.

Many arrive at that point having thought carefully about finances but much less about the life that is to follow. After all, it is very difficult to accurately imagine the retirement phase of life if you are in a role or family environment that is fast paced and gives little time or headspace.

“What am I actually going to do?” is an important standalone subject, and it requires some deep thought and sometimes a bit of soul-searching.

Yet it is the foundation of the financial answer. Someone planning several years of serious travel has a very different number from someone who wants to be near the grandchildren and spend their time on a golf course or the garden.

Added to this are other important factors including how much – if anything - someone wants to leave behind as their financial legacy, or gift to loved ones whilst alive.

A 30-year phase that is not one-paced

So, you now have a good idea what you want to do after you finish work. And with that you now have a figure in mind. How realistic is that?

Post-work can be a 20, 30, 40-year phase.

And that means it is very unlikely to be the same throughout. Even once you arrive at a figure, it is rarely one figure.

Inflation is an obvious consideration.

The less obvious part is the different paces of retirement leading to different spending levels. And this is a pattern many of us have seen with our own parents and grandparents.

The early years of retirement are usually the expensive ones. Energy is high, health is good, and the things postponed for two decades get done.

Later, activity tends to reduce, and spending reduces with it.

Health and longevity are key considerations. No one knows how long they will live. Health and care costs can come along and change the picture.

There is no one-size-fits-all answer here. The only way to arrive at your number is to spend time thinking about what's most important to you in the life ahead.

Additional considerations for expats

For many British expats, the picture is more blurred.

Assets are often scattered across jurisdictions and currencies — a UK pension, perhaps a frozen final salary scheme, an offshore portfolio, property at home, savings funding a life priced in another currency.

And our future location is often undecided, perhaps it will not be the same location throughout, and living costs vary widely in different locations.

We cannot take it with us

It is crude I know. But it is true, we cannot take with us any wealth we still have when it is our time to leave this world.

I have seen people have more money than they know what to do with in later life and regret not doing things when they could.

The number crunching

Giving due thought to our future life leads to robust financial planning. It is that way round.

Once we know what we want our life to look like, that is when the technical work becomes worth doing.

This allows us to forecast, to see the impact of key decisions. It allows you to see ‘what if’ and stress test some ideas. Here are some real client examples:

- What if I stop working at 55 not 60?

- What if I split my time in the first 10 years between France and the UK?

- What if I keep two properties?

- What if I spend much more in the first 5 years?

- What if I gift my children some money now, will I be ok?

And whilst this is a valuable exercise as you plan ahead to retirement, equally it should be reviewed regularly as you go through the years before and through retirement.

The valuable part

Here's what 30 years of working with clients has taught me.

The modelling helps and it matters, but it is only as good as the quality of thinking that comes before it.

Client feedback suggests the really valuable part of the planning work we do is the time spent thinking it through: being asked questions not asked before, and being properly listened to while they worked out the answers.

If the question “is it enough?” or “how much do I need?” is something you want to explore, or as an existing client something this causes you to want to re-evaluate, do get in touch and we'll take a proper look together.

With best wishes, Gary

Gary Smithson - Partner, Farringdon Asset Management Singapore and Malaysia

​gary-smithson-farringdon.kit.com​

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