5 Reasons Why Successful Professionals Retire Unsuccessfully

I have worked with many successful professionals over the course of my career and the vast majority, with the help of some financial planning, transition into a successful and fulfilling retirement.

On the face of it, a partner at a law firm, a management consultant or an investment banker earning a good six figure salary with a profit share or bonus that perhaps takes their total earnings into seven figures is expected to have no financial worries, right?

However, this is not always the case and I have identified five key reasons why this might not be so.

#1 Spend Too Much and Accumulate Too Little

This is perhaps an obvious reason and I am certainly not advocating that successful professionals should save every penny they earn and put off enjoying themselves until they retire. However, there needs to be a balance between spending and saving.

When putting a financial plan together for successful professional clients, here are a few expenditure items that can have a significant impact on saving for the future:

School fees – educating two, three or four children privately.
Maintaining or renovating an old property.
Having an expensive hobby such as classic cars.
Supporting adult children beyond university.

These can be incredibly important and rewarding areas of expenditure but it can sometimes be too easy to neglect saving for the future. Having a financial plan in place will help you to strike the right balance.

#2 Changes to Income Levels

Most successful professionals would expect their basic earnings to increase, however, is it realistic to expect profit share or bonuses to increase year on year? If you are dependent on a bonus, for example, to meet your expenditure needs, it can be difficult when bonuses are reduced or if there is a change to how bonuses are paid.

For example, before the 2008 financial crisis, many investment bankers enjoyed significant bonuses paid in cash, however following the crash, banks would pay bonuses in the form of shares that couldn’t be sold for a number of years.

For successful professionals in whatever profession, a down turn in the global economy can have a negative impact on profit share or bonuses. Who could have predicted Brexit, the Pandemic or Russia’s invasion of Ukraine?

There could be other reasons why there might be a change to income levels. For example, a partner in a City law firm moving to a regional firm.

A management consultant, for example, might decide to leave and become a director at a struggling company hoping to turn it around. Remuneration might now be dependent on performance and that could be linked to share price performance. The pay-off could be significant but there may be a few years of lower earnings.

Having realistic expectations of future income and how this could impact future savings is essential. Again, a financial plan will help assess the impact of this.

#3 Failing To Plan

This is perhaps the most common reason why successful professionals retire unsuccessfully and there are a number of different strands to this.

Financial Planning

Firstly, there is the financial side of things, where successful professionals, without a plan in place, have accumulated a mis-match of pensions, investments and various insurance policies. Often, they will have a large amount in cash in different accounts that were once paying reasonably high interest rates.

The main reason for this apparent financial disorganization, is that successful professionals tend to be cash rich and time poor. I’ve worked with a number of management consultants who can figure out the most complex pension legislation but don’t have the time or the mental band-width to spend hours and hours poring over the technical specifics. This is why they engage a financial planner!

Having a coherent investment and financial planning strategy in place is vital for a successful retirement.

Purpose

Another strand to failing to plan is that many successful professionals cannot visualize beyond their current role. They may be a senior partner in a law firm or management consultancy or a senior investment banker, however, the day they retire, they will cease to have that job role.

You may have an impressive business card today but you need to create a successful business card in retirement. You may need to redefine your identity, your mission or purpose in retirement.

Many successful professionals look to non-executive directorships or consultancy roles in retirement. The issue here is that, if all of your professional connections are in the same industry as you, do you end up retiring into a similar position that you retired from!

Involving Your Spouse or Partner

A significant strand that is often, surprisingly, overlooked is ensuring that you are on the same page as your spouse or partner.

I remember speaking with a senior partner at a city law firm and, for the first couple of meetings, his wife was unable to attend due to other commitments. He was often working long hours, six days a week. During our third meeting, when she was able to attend, I asked what he was looking forward to in retirement and he replied spending more time with his wife and he then began to explain all of the things he had planned that they could do together. She looked somewhat horrified. It turns out that whilst he was working she had built up a large network of friends and had taken up a number of hobbies which she now didn’t want to give up.

They were great clients, saw the funny side of the situation and they managed to reach a happy compromise. However, it illustrates the importance of discussing your retirements plans with your spouse or partner but also, more importantly, involving your spouse or partner in the financial planning discussions to start with.

#4 Divorce

More and more people are getting divorced later in life although most divorces happen between the ages of 45 to 54.

Unsurprisingly, divorce can have a huge impact on retirement planning and may entail losing half of your pension and other assets, finding and financing a new place to live and then paying ongoing maintenance costs.

This is on top of the legal fees and the emotional stress and turmoil that divorce can bring whilst holding down a stressful and challenging job.

If you do go through a divorce, it is important to take stock, review your current situation and determine how best you can get back on track.

#5 Health

If you are a successful professional in your fifties or sixties, how many professional connections, colleagues or family members do you know who have had health scares before retiring which have had a subsequent impact on their lifestyle in retirement? How many people do you know who have died shortly after retiring?

For me, one of the key measures of a successful retirement is to do the things you want for as long as possible and that means being as healthy as possible.

Most successful professionals live a relatively sedentary life; we may drive to the office, we may spend several hours sitting at a desk and, once back home, we might sit around reading or watching tv.

As a financial planner it can be difficult to discuss health with clients – when asked about their health, most clients will say that they are in good health.

My job is to help clients design their ideal lifestyle and to help them articulate what they want to do more of and what they want to do less of. Most clients think they have all the time in the world to do all the things they want to do but actually it is quite a narrow window. According to the Office for National Statistics, someone age 65 has, on average, around 10 to 11 years of disability-free life expectancy.

Maintaining good physical and mental health in retirement is essential for a successful retirement.

Conclusion

Successful professionals are asset rich and time poor and putting a financial planning strategy in place is extremely challenging. This is why it is often left to the last minute.

The answer is to start early and engage a financial planner several years before retirement. The basics can then be covered such as utilizing tax reliefs and allowances for maximum tax efficiency. Over time, a strategy can be built, taking into account your desired lifestyle in retirement.