Why is 56 such an important number when it comes to financial planning?

Why 56Wealth?

When clients find me, they often ask about the business’s name. “Why 56?” they ask.

There are many financial milestones in life. Every decade brings something new and that can be exciting – or scary. In general:

Your 20s – leaving home and embarking on your career.
Your 30s – buying your first house, or maybe starting a family.
Your 40s – reaching your career peak, at least in terms of the money you earn.

But it’s your 50s that I think are the most important.

Specifically, around age 56.

Because, at this point in life, you may well have paid off the mortgage (or at least be close to it), and your children might be off to university. You could now be thinking about early retirement.

Financially speaking, for people at this stage, staying in work becomes less of an obligation and more of a choice.

But getting there can be stressful

If 56 is the age when financial independence tends to really kick in, getting there is often both exciting and terrifying. While it’s fun to dream of what we’ll do when we’ve got fewer financial commitments and a bit more spare cash, it’s also very easy to get overwhelmed.

There’s often uncertainty about the future, there are lifestyle adjustments to consider, and for those who have tied their identity closely to their work or career, retiring or stepping back can be intimidating.

The job of a financial planner is to take this scariness out of the equation. It’s someone to coach you through the areas you’re less familiar with, to make sure you have everything you need to make informed decisions, and to empower you to take control.

I often discuss five things that can help you prepare

1.     Start early (if you can)

The earlier you start thinking about these areas, the easier it gets the other end. There’s the financial benefit of starting saving into a pension or investment fund, but it’s also important to think early on about what you really want from life. Start setting some goals (dreams) and objectives (specifics) even if you change these later.

2.     Ask “What’s the best outcome for me?”

Success doesn’t look the same for everyone. You can work hard in your career, only to wonder “What’s next?” So have a think about the best outcome for you. Do you want to retire early? Wind down gradually? Or perhaps even change career?

3.     Take a look at what you’ve got

It can sometimes be difficult to see the wood for the trees when you have several pensions (workplace or private), life insurance, a mortgage etc. Setting out what you have saved, and what your financial commitments are, gives you a solid starting point and the confidence to focus on what matters most.

4.     Get educated

Feeling more informed about areas such as investing, pension planning and tax issues can help you avoid being caught by surprise by something like inheritance tax. I believe that more coaching and education as part of the financial planning process can help you grow your confidence to invest.

5.     Don’t apologise

Most of us don’t like talking about money. It’s not unusual for people to go a bit coy when revealing how much they earn in conversation or discussing plans to grow their wealth. Sometimes clients can seem unsure about what to say when we start discussing investment returns.

It’s ok to be modest. It’s ok to view life as more than just ‘winners’ and ‘losers’. But I believe investing for your future should be guilt-free. It’s ok to grow your wealth. In fact, this gives you more choices and can help you affect change (a topic I’ll return to in future posts). There’s absolutely no need to be apologetic about it.

Finally, don’t limit yourself

No one is saying that you have to retire at 56. Or that you’ve failed if you go beyond this number. But wouldn’t be great to know by then (or maybe earlier?) that you’ve got options?

My message to clients is always, don’t limit yourself from the get-go. I want people who speak to me to feel empowered and in control of their financial choices. Whether that’s having the confidence to broaden your investment horizons, or to take a firmer stance when negotiating a raise with your employers.

56 might be when you start to wind down, or it could be you’re just getting started. Whatever it is, we’ll work through the trickier decisions together to help you do something that makes you happy.

Would you like to be able to choose to work at 56? What’s your number? 

Find out more by contacting Nicola.