We already know that we have to put more energy into income at later age. I figured that out years ago, when I didn’t believe that you can, decades ahead, plan how much money you should save or invest to be able to live off the interest or results. There are so many aspects playing a role here that you really have to think twice to rely on this alone. But – did you think of how your income at later age will be?
To start with – what do you aim for doing all that time that you don’t need to head for work, business to earn your money?
- Do you like to read those 256 books in the days that you can enjoy your pension?
- Or will you travel – at what destination, how do you get there, how do you stay and for how long? How often do you want to travel?
- What car will you drive, especially if you don’t have the luxury of making use of the company-provided car?
- Do you like dining out?
- Or do you think that your (grand)children are there for your entertainment?
- Will you live in the same house?
- Did you think of this kind of things?
If you didn’t do it yet, it wouldn’t harm to dream about this future. Because that’s the goal you probably will chase after. If not prominently yet, at least you will have a subconscious idea about it. Are you visually oriented? Look for images and paste them on a sheet of paper, a moodboard. This will certainly help.
The money you need
Then, the next step: how much money will you need to realise all this? Just count the costs of your just-found ambitions after profession. If you really want to enjoy your old days, what you will be calculating is only a slight estimation but it’s a starting point. That’s the money you have to anticipate on to have available in one way or another. Or more.
The money you will get
Will you get it from a state pension? I bet not. Then you may have a company pension or other kind of collective scheme. This used to be a nice top-up towards the standard of living you would be used to in your working life. But if you have it, it’s more and more likely that this also will not cover the cost of living and fun you want to have:
- The fund management costs are increasing – especially after the lump sum has been released to pay you
- The investments of the funds are staying behind expectations, before (as now is the case) or after your actual pensionable age
- Your interests change, you may want to do and spend more (as you have more time available)
- Something happens to ‘the system’ such that it collapses (I don’t hope it for you but some pension funds went bust or can’t deliver to expectations)
- The payment basis changes, like from your latest-earned income to a middle-earning (which is bound to be lower as well). Or, as was announced with my pension plan: there’s not really a target anymore. This means you pay and when the funds are getting released, you have to live of what the fund manager has achieved. Or not.
I may have forgotten something here but you may get the message here: are you relying on one only system? Most people do rely on investment-like systems or a state system. Is this future proof? Do you want to rely on these kind of systems? Yes, there are some guarantees but current pensioners experience that their reliable income is also going down with the performances of the funds, investments etc. Not that much they can do about that…
So… put your energy in the third pillar
Younger people already got this. They don’t in general not expect too much from a collective or state income after a retirement (if they will do). They put more energy into income at later age. What are the options?
- Another investment scheme
- Save more and put it aside
- Continue working but probably not that challenging, mentally or physically
- Create a royalty income
The investment scheme and saving options have the advantage to be independent of a collective but still, it will be limited, and you have to build it. That’s also requiring extra funds in the time that you actually are building it, that you can’t spend when you’re still working. And also that time, you want to enjoy, don’t you?
You can continue working – that would even be great as this keeps your mind and body moving. You don’t really want to be tied down to working times and schedules preventing you to live the life you want to.
The royalty income option then? That looks like a nice alternative. This is an income that continues and can be inflation-proof too. Depending on how you build it. If you write a book, you have to really make a best seller to earn an income that is worthwhile. Music, the same. Christmas songs are popular with many artists as they especially generate royalty income during the last months of the year. But there are more options, like network marketing. Here, the income is based on the sales of a group. As long as the group keeps on using products, your income will stay on and as the group grows, the income will do as well. The price of the products moves with the economy so also the inflation will be dealt with. The only you need to do is selecting a company that has a good pay plan – and a future-proof outlook. So they need to be serious in their business and not aiming for the fast money and then disappear.
Do you put on your thinking hat?
That’s great. It may be not that exciting to think of your income when retired from your traditional job but it can be very rewarding. And for me, it opens new vision and a new future, new possibilities and options.
Do you have questions? Don’t hesitate to share them in a reply or contact us directly.