Before we identify the keys to a happy and successful retirement, let us edge around a few talking points surrounding the entire process of entering the third and final plateau of the lifespan. Most of us get anxious as retirement looms, and it is as well to face facts before someone else thrusts them uncomfortably in our direction.

What do I need to enjoy the retirement years?

What you need is a plan; a plan of your own devising. There is no single standard formula for success, because each individual must decide for themself how they want to live during the retirement years. Everyone must prepare for the emotional, physical, and financial realities of retirement, but fortunately the number of resources to help shape one’s plan is increasing every day.

Identify the keys, set your goals, tap into the resources, and the plan will take care of itself, as you will realise when we reach Chapter 14.

What will the future hold?

Sixty-eight per cent of respondents in a recent US government survey had no formal preparation for retirement. What type of planning did they consider most important? Financial planning, answered 24.3 per cent, but a surprising 23 per cent indicated that developing interests to pursue in retirement was most important.

One big mistake that many people make is assuming that retirement is going to be a continuation of the old life. But it isn’t really a holiday from the work world, because you won’t return there full-time. It will involve major changes in the routine that governed every aspect of your life. Once you retire, you will have 45 to 50 hours a week of extra free time. Even the most absorbing of hobbies and interests may not fill that time entirely.

As you plan for retirement, plan for future fulfilment. Think through your ideal post-retirement day, in specifics, not generalities. Begin to develop interests and activities that will provide you with a variety of pursuits in retirement, from hobbies and further education, through voluntary or part-time work, to starting a small business for pleasure or profit.

What about financial planning?

You can’t retire without the financial means to support yourself. This doesn’t mean, however, that you have to be independently wealthy. With solid financial planning and realistic saving-and-investment goals, it is entirely possible to retire and maintain an adequate standard of living. Even if all you have to live on is your state pension, you can still make a go of it. Although it is never easy when money is tight, many retirees make an admirable fist of their financial limitations. When you plan for achievement, anything is possible.

Many financial planners and investment advisers market services whereby they evaluate your current situation and make recommendations to you.

• You will need an overview of your current net worth.
• You will want objective advice about the ways you can increase your net worth to achieve an acceptable income during your retirement years.

Here’s a cautionary note: make sure that you are under no obligation to purchase any stocks, insurance, or other products from the person who prepares your plan. Investigate carefully any financial consultant you are considering before you begin a relationship. Friends and colleagues may be a good source of referrals.

In any case, always consult works of reference to help you plan and evaluate your retirement finances. Your local public library contains many helpful books about financial planning for retirement. Read about your options - and the earlier the better.

How much should I save?

Deciding how much money you need for retirement is obviously a highly personal calculation. It depends on any number of factors, from your current lifestyle to your general state of health. Arriving at finite conclusions

is no easy matter, and that is why Money Advise http://www.moneyadvise.com/budgetform/ has designed a free set of online budget forms to let you tailor your estimate according to your own circumstances (Figure 2.1).

These worksheets will take a little while to complete. But when you are done, you will have a dependable estimate of how much money you will need in retirement - whether you retire early or late - and how much you will need to save this year to reach that goal.

What the worksheets won’t tell you is what to save five years from now, or even next year. By then, anything from your circumstances to your market outlook might have changed. That means you should take the time to repeat this planning exercise every couple of years - or every year as you near retirement. I began to use these worksheets a few years before my own retirement, and found the application extremely useful.

What about pensions?

Many retirees have private pension plans; many more don’t. If you fall into the latter category, your state pension income will depend on how much you contributed during your working life, and whether or not you contracted into or out of the state earnings-related pension scheme (SERPS).

If you are more than four months from the official retirement age, you can apply to have a state pension forecast by visiting www.inlandrevenue.gov/uk and completing the online form. This forecast will show your pension, based on your circumstances at the time, and will include details of any additional pension, contracted-out income, or graduated retirement benefit that you are entitled to. If you are widowed or divorced, your late or former spouse’s national insurance contributions can sometimes be used to get you a better pension. Further information not covered by your pension forecast will be sent to you separately.

If, on the other hand, you are fortunate enough to have a company pension to draw upon, and are either recently retired or about to retire, you should consider the following essential factors in your retirement planning.

Company pension statement

Is your pension what you expected? Check that your company pension statement correctly records your personal details, such as:

• your name and address;
• your date of birth;
• your marital status;
• the name(s) of your spouse(s), if any;
• the name(s) of your child(ren), if any;
• the date you entered a company pension scheme; and
• the date you left a company pension scheme.

Final-salary pension scheme

What type of company pension scheme do you belong to? In a final-salary pension scheme, your pension is calculated by multiplying your years in the scheme by the accrual rate (usually a 60th of your final salary). If you belong to a final-salary pension scheme, you would be wise to check:

• how final salary is defined;
• what is excluded (for example, overtime);
• whether the final salary includes the whole salary or the salary less the lower earnings limit; and
• what the accrual rate of your scheme is.

Money-purchase pension scheme

In a money-purchase pension scheme, you and your employer put money into a fund, the performance of which determines the size of your pension. The fund can fluctuate in value with stock-market movements. All additional voluntary contribution (AVC) funds are related to money-purchase pension schemes.

Contracted-in and contracted-out pension schemes

In a contracted-out pension scheme (that is, a company pension scheme that has contracted out of SERPS), you pay less national insurance and don’t receive the additional state pension at the official retirement age. Instead, you receive an equivalent amount from your company as part of your company pension. In a contracted-in pension scheme (that is, a company pension scheme that has contracted into SERPS), you pay the usual amount of national insurance and receive the additional state pension at the official retirement age.

State make-up

In some company pension schemes, your company pension is reduced when you reach the official retirement age and take your state pension. It means that your income doesn’t increase by very much at the official retirement age, but effectively you have enjoyed a better pension up to that time. Check in your pension booklet to see if this applies to your scheme.

Pay day

Company pension schemes may pay on the same day as your salary used to be paid or on a different day. Check when your scheme pays, in case your bank balance is ‘compromised’ soon after you leave work.

Payslips

Many company pension schemes don’t send out payslips every month because of the cost. You may only get one when your pension varies by more than a certain amount from the month before.

Tax office

Check if your tax office will change when you start claiming your company pension.

Changes in your circumstances

Make sure your company pension scheme administrators know if you move address or alter your marital status. If you change the bank account to which they transfer the pension, let them know.

Tax

Your pension will be taxed according to the tax code issued by the Inland Revenue. If this is wrong, you may pay too much or too little tax. It is up to you to check your coding. If you have other sources of income, make sure the tax allowances are set against your main income. At the official retirement age, your tax code will change, so that the tax on your state pension is recovered from your company pension.

Company pension increases

By how much does your company pension increase each year? Private-sector pensions must be increased by a minimum amount by law, usually 3 per cent or the rate of inflation, whichever is the lower. Many private-sector pension schemes also top up the payment to approach or match inflation. The top-ups are at the discretion of the trustees of the scheme, and aren’t automatic. You should be able to see a record of increases if you ask.

If your pension scheme has contracted out of SERPS, your company will make increases on most of your pension, but the SERPS element (known as the guaranteed minimum pension) will be linked to the retail price index (RPI) by the government once you reach the official retirement age. Most public-sector pension schemes are RPI-linked.

Working beyond retirement

You can continue to work beyond retirement and still receive your company pension. All income is added together for tax purposes, and you are taxed accordingly. There is no tax disadvantage in getting extra income — the more you earn, the more you get, even though it is taxed.

Company pensions from previous employers

If you have deferred company pensions from previous employers, get a statement from them indicating what pension might be payable, when it can be paid, and if there are any commutation rights (that is, options to commute part of the pension into tax-free cash). In other words, ask the same questions that you do of your current company pension scheme. Legislation now allows greater flexibility in the treatment of preserved company pensions than may have been the case when you left company pension schemes. If you have lost track of the company with whom you had the pension, or the company has ceased trading or gone bankrupt, you can still find the pension from one of the following addresses:

• The Registrar of Pension Funds Occupational Pensions Board, PO Box 1NN, Newcastle-upon-Tyne NE99 1NN. Tel: 0191 225 6398.
• Occupational Pensions Advisory Service, 11 Belgrave Road, London SW1V 1RB. Tel: 0171 233 8080.

You can also get help from an independent financial adviser or through the Citizens’ Advice Bureau.

In case of death

Check that the beneficiaries you have nominated in both your current and previous company pensions are still according to your wishes. This is especially important if your personal circumstances have changed, perhaps due to marriage or divorce. The ‘Expression of Wish’ or ‘Nomination’ form should be filled in. This indicates to the trustees whom you wish to benefit from any payments due from the company pension fund in the event of your death. You can change the names of your beneficiaries at any time.

Dependants’pensions

When a pensioner dies, the surviving spouse will normally receive a dependant’s pension. In most company pension schemes, the dependant’s pension is half of the employee’s pension (see also ‘Five-year guarantee’ below), and the dependant’s pension is not affected if part of the pension is commuted into tax-free cash. However, check the arrangements of your own company pension scheme - there are some variations. The dependant’s pension will normally be paid to a spouse or partner, but some schemes only pay to legally married partners. There may also be restrictions if the partnership is of short duration or if there is a large age difference. Children may also benefit from a dependant’s pension if they are below a certain age. Again, make sure to check the arrangements of your scheme.

Five-year guarantee

Most company pensions are guaranteed to be paid for five years after a person retires. This means that if a pensioner dies within the five years, the balance of money that would have been due is paid to the surviving spouse as a tax-free sum. The dependant’s pension normally starts on death. There can be variations, so check what your own company pension scheme does.

How can I diminish the disadvantages of retirement?

In her book When Women Retire: The Problems They Face and How to Solve Them (Crown Publishers, 1992), author Carole Sinclair advises, ‘If a job gives your life structure, plan to replace that structure in retirement.’ In terms of fulfilment, it is important to understand that many people, both men and women, receive a great deal besides a pay cheque from their jobs. Job-related benefits, aside from income and cash flow, include:

• a structure to one’s life;
• intellectual challenges;
• a sense of self-worth and accomplishment; and
• the camaraderie that comes from working with other people.

Are you certain you are ready for retirement? Surveys show that many people who retire don’t really want to, so take careful stock of whether you are prepared to lose the structure and other benefits of the working world. If you are forcibly retired or are unhappy in your current job, you have other alternatives than a lifetime of unstructured leisure. Now more than ever, older adults are heading back to college, or into other careers, or into voluntary work after their long-term careers end.

Here are just a few options to consider.

• Keep on working if you can, by staying on at your job past the age of 65 or beginning in a new career.
• Work part-time either with your present employer or at another company.
• Do voluntary work for fulfilment, for example, at a local school, hospital, or cultural institution. Once you are bitten by the volunteering bug, you may well find one type of voluntary work leads to another. The emotional and intellectual rewards can be tremendous.
• Start your own business.

Retirement will change your life completely. In particular, it will increase your leisure time. Your happiness therefore depends on understanding your own needs, and structuring both time and activity to meet those needs.

General keys to a happy and successful retirement

The most important aspect of adjusting to retirement is planning for a smooth transition. You would do well to start by identifying the general keys to a happy and successful retirement. Some examples of general keys are identified below.

• 1Practise living on your estimated retirement income after deductions, say for business expenses.
• 2Start developing some of the retirement activities you think will interest you. There are contacts to make and research to undertake, whether you have in mind voluntary work, further education, a second career, or starting a business.
• 3If you plan to move, learn everything you can about your prospective new home patch. It isn’t likely that you will be able to move repeatedly, nor would you want to, so spend time if you can in the new neighbourhood. Talk to people who live there; keep looking for disadvantages. You already know the advantages because they are what attracted you in the first place.
• 4Strengthen relationships outside the working environment — with family, friends, and neighbours.
• 5Check how long it takes you to perform various activities around the house or garden; chores that you look forward to doing in retirement. You may think there are enough everyday jobs to keep you busy forever, but you will probably zip right through them in a few weeks and then have to start looking for something else to keep you fully occupied.
• 6Involve any spouse or partner in your retirement plans. This is just as important as working out a viable financial future. Couples who have lived together in the evenings, at weekends, and during holidays for virtually all their lives don’t necessarily find it easy, especially at first, to be together all day, every day. You and your significant other might want to talk together about seemingly minor potential irritants.

Specific keys to a happy and successful retirement

Your ability to handle stress in this phase of life isn’t only a key to longevity, but also a foundation for a fulfilling journey in the third age. Researchers have identified core lifestyle attributes that are present in happy and successful retirees, and in individuals who have stress-proof personalities. These attributes include:

• taking and maintaining control over the principal elements in their lives;
• being committed to living each day to the full;
• challenging themselves to learn new things and create new activities; and
• connecting freely with family, friends, and community.

The identification of specific keys (that is, core lifestyle attributes that relate to you personally) is germane to happiness and success in retirement. Some examples of specific keys are identified below.

1 Having a positive attitude towards ageing and life transitions

Our ability to roll with the punches is a key factor in stress management. There are life transitions that we can expect in retirement; sociologists have identified at least six separate life transitions in the retirement phase alone. Coupled with the predictable changes are those unpredictable life events that take the best-laid plans and blow them asunder. Perhaps the greatest transition of all is the one that we see each time we look in a mirror and see ourselves age. It is easy to forget that ageing needn’t feature in our minds.

2 Having strong visions and values

The foundation of a happy and successful retirement is an understanding of what the primary aim of life is. This gives us our sense of purpose and defines fulfilment in our activities, relationships, health, and money matters. If we don’t have a sense of purpose, what gets us up in the morning? The concept of ‘living on purpose’ is a great descriptor of a happy and successful retirement. Our life dreams, and the goals that we set to give our life meaning, come from this life purpose.

3 Subscribing to healthy ageing

If we don’t feel good about our lives or ourselves, we undermine all of the other factors that may be in place in a happy and successful retirement. The most important element of healthy ageing is our mental outlook rather than our physical state. Well-being refers more to how we view our physical fitness than to whether we are actually physically fit. In retirement, stress management becomes a crucial element of healthy ageing.

4 Having a positive definition of work

Our work is the thing that we do to contribute our skills, experience, labour, or knowledge to society in some way. Even when we leave the traditional workplace, we still have a need to share our administrative strengths and transferable skills. Finally, if we have a positive attitude towards the workplace, then the desire to have a retirement free from any kind of employment becomes irrelevant. A wise person once said, ‘If you love what you do, you never have to work again!’

5 Nurturing familial and marital relationships

In general, we need close familial relationships. Our relationships define us, give us a purpose for living our lives, and force us to create life goals. They can also act as external controllers when we find ourselves in the midst of marital or familial discord. Researchers have found that people in satisfying personal relationships have fewer illnesses and better overall health.

6 Having a supportive social network

We all have a basic need to share our lives, experiences, and temporal journey with those closest to us. In retirement, our friendships and close relationships may offer us the validation that we received in the workplace. Those relationships give us the opportunity to connect on many levels with someone close, and to share ourselves. Psychologists have identified our desire to share ourselves as a basic human need. This need is often satisfied in the activities that we enjoy with our friends and wider social network.

7 Engaging in meaningful activities and leisure

Leisure is a fundamental human need. We use it to recharge our batteries, to act as a diversion in our lives, to create excitement and anticipation, or simply to rest and contemplate. Things change, however, when leisure becomes the central focus of our lives. Leisure, by its very nature, loses its lustre when it is the norm in our life rather than the diversion. For many retirees, the idea of leisure is associated with not having to do anything. A lack of stimulation affects our mental and emotional state, and ultimately our physical well-being. There is a big difference between time-filling activities and the fulfilling activities that we look forward to. In retirement, leisure activities often replace workplace functions to meet the basic needs that we have.

8 Enjoying financial comfort

Some retirees feel that a happy and successful retirement is guaranteed by financial security. However, there is no price tag on a happy and successful retirement. Financial comfort refers to retirees being able to manage their lives in a satisfying and fulfilling way by using the resources they have. If financial discomfort contributes to retirement stress, then this element isn’t in place. Many retirees are able to enjoy happiness despite having far less than others, simply because they have the ability to cut their coat according to their cloth.

When it is someone else’s retirement under review

Perhaps the retirement you need to plan for most isn’t your own — it may be that of your spouse or partner. How can you minimise the stress on your relationship?

• Be sure to plan finances together. Money planning will cushion stress and help you develop a realistic picture of your future.
• Plan separate activities to assure privacy for each other. Respect each other’s routines, friends, and conversations.
• At the same time, develop some common interests, from hobbies through sports to work on a political or community campaign. Such activities help stimulate each other’s involvement, and assure you of continuing things to talk about and plan for.
• Keep your lines of communication open. In retirement, you will be talking with each other more than ever before.