What is Financial Independence – is it the same as retirement?
A focus of many of the people who seek financial advice is to plan ahead for their retirement; a time when they give work away, a time when they can kick back and enjoy the fruits of their labours. Kids have flown the nest, debt has been repaid and, in many instances, they are working not just to make ends meet but because they enjoy what they do.
The age of 65 still seems to be the benchmark for when many people plan to retire. This age was in line with when access to the government age pension was available. New legislation starting from July 2017 however gradually increases the age requirement to age 67 by 2023. Will this also change people’s anchor to age 65 or will 67 become the new norm?
Many use this age as the anchor point from which they base their plans. We have seen many times that people stop working without taking the time to plan what their lifestyle will look like when they stop work – there is only so much golf you can play each week!
Yes, they may have planned the financial side of things but without thinking through what life looks like when the old routine is no longer relevant and that can be confronting. At Eqeus, we encourage our clients to think about this aspect of their future. We have even seen relationship breakdowns arising from poor lifestyle planning.
This is why we encourage our clients to think about the things they want to achieve in retirement (their goals) and we then help plan for this. We uncover what is truly important, as opposed to taking at face value that the only goals is $X for X years.
Just because people have stopped work doesn’t mean they don’t have anything left to accomplish. It is our experience that the people we have helped plan for retirement and are retired are living a lifestyle that seems to us amazing. We are constantly hearing about the next trip or the last one.
Just recently some clients completed a trip to the US where they drove the west coast in a Mustang, then on to some whale watching on an Alaskan cruise! Magical stuff. These lifestyle experiences are hugely important to our clients. We get great satisfaction from knowing they are in a financial position to live the life they have dreamed of and that we have helped them get there.
Many of the people we work with have reached the point of financial independence whilst we also work with others who strive towards this point. Financial independence, in our opinion, is the point where you have sufficient capital to provide a passive income stream as well as lump sums that will help you achieve your dreams and goals without the need for you to work. When we talk to many of our clients, retirement may seem to be too far away to be of too much relevance at this stage.
However, when we re-frame that a more appropriate term may be financial independence, this resonates strongly. When you have reached this point you can choose whether you wish to retire as opposed to having to stick with the current age anchors. We therefore prefer to help the people we work with plan towards financial independence, helping them define what this looks like. And for those already at this point, manage and optimise their affairs so that they can remain financially independent without having to worry about money.
if you’d like to find out more about determining your financial independence just contact the team at Eqeus today to get your financial house in order; we’d love to hear about your lifestyle goals.