Why a mid-life financial MOT might be a good idea, no matter your plans

Category: News

The American author, Ralph Marston, once wrote: “What you do today can improve all your tomorrows”.

The pandemic brought about many changes to the UK workplace, one being a large-scale shift to early retirement. According to the Guardian, 630,000 people have left the UK workforce since 2019 with UK employment figures still below where they were in early 2020.

These come as many recently retired individuals won’t have factored the effects of the cost of living crisis into their long-term plans.

The mass exodus of experienced workers into retirement has pushed the government into championing a mid-life MOT in the hopes of retaining older workers and encouraging recently retired ones to re-join the workforce.

The Department for Work and Pensions (DWP) has been promoting the benefits of mid-life MOT for a few years now. The government agency is expanding their initiative to help Brits review the state of their finances, skills, and health, so they’re better prepared for the decades ahead.

Financial planning has the same end goals of ensuring you are appropriately prepared for the life you want to live and the retirement you are working towards.

If you’re in your 40s or 50s, sitting down with a financial planner to assess the state of your plans could be incredibly beneficial.

Read on to discover why a midlife MOT might be a good idea for your finances, career, and health, regardless of your long-term plans.

A mid-life MOT can help you assess the financial health of your pensions

According to research from Unbiased, a comfortable retirement with little to no financial worries costs:

  • £33,000 for a single person each year
  • £47,500 for a couple each year.

This level of retirement income is expected to cover essential expenses and provides a modest budget for holidays and large purchases.

Unbiased also reports that early retirees, those opting to retire between 55 and 57 are likely to need retirement savings of at least £650,000 to cover their needs. This would provide £32,500 each year for 20 years of retirement.

However, as we wrote about recently, rising costs from inflation, as well as its eroding effect on savings, are likely to mean a larger pot is necessary — especially when UK life expectancies are considered. If you live until your late 80s or 90s, you may find yourself retired for 30 or 40 years. This significantly increases the size of the retirement fund needed to maintain a decent standard of living.

Taking the time to undergo a midlife MOT could help you review if the financial plans you have in place are sufficient to provide for you in retirement.

Unbiased reports that one in six Brits aged 55 and over have no savings in place for retirement beyond their State Pension. Reviewing your finances now could help you get back on track for your long-term goals, and ensure you are secure throughout your retirement.

A mid-life MOT might prompt you to consider the benefits of certain work opportunities

As you enter the latter half of your career, it could be a good move to reassess your long-term plans, how your job fits into them, and if pursuing an early retirement is the right move for you.

Conversely, if you are already actively retired, reviewing your financial needs and the effects of being retired on your wellbeing, could help you decide if a return to work is an option you should consider.

AgeUK reports that one of the leading challenges recent retirees face is the sudden loss of purpose and identity. Opting to continue to work in some capacity, even part-time, could provide a financial and emotional boost.

BMC Public Health compiled research from 17 studies on later-life working habits and determined that working part-time in a low-stress role can have health and wellbeing benefits throughout your retirement years.

A review of your career plans might involve:

  • Assessing your job security and opportunities for progression
  • Determining if you could benefit from gaining any additional skills
  • Reviewing your workplace pension and existing contributions
  • Deciding if your line of work suits a later-life transition to part-time unemployment.

According to People Management, longer life expectancies and rising costs are expected to push the age of retirement to 69 in the next 20 years, so taking the time to assess your career options now, and how work will factor into your later life could be a crucial step in the right direction.

A mid-life MOT could benefit your emotional wellbeing and allow you to adapt to new challenges

Life can present many unexpected milestones and challenges such as:

  • Falling in love and deciding to get married
  • Having children or grandchildren with their own set of needs
  • Providing a parent or loved one with care when they fall ill.

These events can alter your priorities and cause additional stress. A midlife MOT could help you to build financial resilience into your plans, preparing you for whatever the future holds.

It can also allow you time to assess your own health and emotional wellbeing. Reflecting on your personal goals, and whether you’re living the life you want, can potentially boost your long-term state of mind.

A study by Royal London found that individuals who sought financial advice had significant boosts to their emotional wellbeing. The research found that advised individuals had better outcomes than those who didn’t receive advice in several ways including:

  • Feeling more in control of their finances (68% compared to 53%)
  • Worrying about coping financially during retirement (37% to 46%)
  • Feeling better prepared for unexpected life events (44% to 32%)
  • Feeling confident about the future (42% to 35%).

You may find that early retirement doesn’t suit your routine. It may potentially hinder your ability to financially cope with unexpected challenges or makes it difficult to maintain your desired lifestyle throughout retirement.

So, a return to the workforce — even temporarily or on a part-time basis — and remaining active might be beneficial for your finances, career, and long-term health.

Working with a financial planner and undergoing a midlife MOT could be the first step towards realigning your plans with your long-term goals.

Get in touch

If you have any lingering concerns about your ongoing financial plans, or retirement needs, you should seek advice by contacting us at info@lloydosullivan.co.uk or calling 020 8941 9779.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Your pension income could also be affected by the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.