As you approach the end of your career, it’s understandable that you may be somewhat exasperated by your job. After a lifetime of hard work, you might well have had enough of the same frustrations and obstacles that seem to get in your way every day.
At this point, you may be thinking about putting your head down and cracking on until you can’t take it anymore. The end of your career is likely to be the stage of your highest earnings potential and so, while it might be making you unhappy, you might see it as your chance to make your greatest pension contributions before you finally decide to retire.
As a result, you might have chosen to stay in your current role and continue grinding each day, with the aim of giving your retirement funds one last push.
But did you know that this logic may actually be flawed, and that switching to a different role late on in your career could be a better course of action?
That’s according to interactive investor, who have carried out research that suggests “downshifting” your career may actually be beneficial both emotionally and financially.
So, find out why switching careers late on could help you, and what this can teach you about the importance of goals and life satisfaction in your financial planning.
Boost your pot by £89,000, simply by downshifting your career
interactive investor’s research makes for fascinating reading. According to their figures, it’s better to downshift to a less stressful or more fulfilling role for both your mind and your pocket.
Rather than forcing yourself to return to a job that you hate every day, the research suggests that switching to a job you love (or at least don’t despise) could give you the motivation to continue working for longer.
This might involve choosing a job that is:
– Lower paying
– More junior than your current position.
This, according to interactive investor’s figures, would provide a greater boost to your pension savings than carrying on in a role that makes you unhappy.
The research compares two hypothetical individuals who are both 55. Individual A earns £50,000 in net income after tax and minus pension contributions.
They would like to work all the way until their State Pension Age of 66, but simply do not enjoy their work enough. As a result, they have decided they will retire at 62, when they will then begin drawing £21,000 a year from their pension.
Meanwhile, Individual B also earns a net income of £50,000 in a job they do not enjoy. So instead, they decide to switch to a less stressful one paying £35,000 a year – again, this is net income after tax and minus pension contributions.
As hoped, Individual B finds their new role more fulfilling, and so will continue working until 66.
The example then makes the following assumptions about the two individuals, stating that they:
– Have existing pensions of £200,000 at age 55
– Pay 5% employee and receive 3% employer pension contributions until retirement
– Achieve investment growth of 3% on their retirement pots.
All in all, this would see Individual B have an additional £89,000 in pension wealth at age 66 compared to Individual A, who has been drawing on their funds for four years.
So, while Individual A earned a greater income in their less-fulfilling job, Individual B will still have greater retirement wealth, achieved without having stayed in a role that they didn’t enjoy.
This research demonstrates the value of putting goals first
While the figures in this research are entirely hypothetical, they still go to show the immense value of giving your goals and ambitions the same priority as your finances.
Rather than looking at your wealth and deciding what to do with it, an approach of setting goals and then seeing how you can use your money to reach them can be far more sustainable. This perspective puts your emotions and wealth on a level playing field, treating them with equal importance.
At Cordiner Wealth, this is exactly how we design financial plans. We’ll always start with your goals, and then look at the methods of organising your wealth that will drive you towards them.
Doing so encourages you to think in terms of what would give you the most fulfilment in life, rather than just focusing on the pounds and pence.
Most importantly, we can act as a sounding board for your ideas and show you how they might affect your financial situation in future.
For example, if you were considering downshifting your career to find a more fulfilling role, we could show you the mathematical impact of that choice and how it might affect your ability to achieve your goals.
By employing this joined-up approach, you’ll be able to use your money to live the kind of lifestyle you want.
Get in touch
Whether you’d like to work out when you can retire, or you have any other questions and concerns about your financial planning, we can help.
Email email@example.com or call 0113 262 1242 to find out more.
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. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator.