My husband passed away some time ago, shortly after he retired from his position as senior partner in a professional practice. I now live on my own so one of my great joys is watching my grandchildren grow up. I want to support them if possible using some of my capital. I have a small circle of close friends and I would like to do more with them and see more of the world. I am fit and healthy so there is no reason why I shouldn’t, but I think worries about money and the future prevent me spreading my wings.

So what specifically concerns me?

Long term financial security

I have some pension income and a portfolio of investments that provides me with additional income and from which I can draw down capital if needed. I need to know that I can spend money now on myself and my family without prejudice to my longer term security. My greatest fear is that I will run out of money before I die.

Support and encouragement

I want someone to not only “give me permission” to spend money, but also positively to encourage me to spend money, to give me the confidence to spend money on myself and my family in the remaining years of my life.

Professional security

I understand the need for advice and help, especially when it comes to health and money, but I must be able to trust my advisers completely and be certain they are going to look after my interests and my interests alone. I want two-way, long term understanding and relationships with my advisers.

Family

My family are so important to me, as they were to my late husband. I want to know how I can help my children and grandchildren.  Can I afford to give them money to pay for cars, education etc?  To what extent can I help the grandchildren with such things as university fees and finding a first home?

Growing old

How do I maintain my family and social life in coming years, especially as I get older?  How do I deal with long term care issues – do I stay at home or do I move into a home?  Both have financial consequences that I need to deal with. Will age and health restrict my ability to keep in touch with the children, both emotionally and physically, as my mobility decreases.  Worse, will I end up being a burden to my children; how can I prevent this?

Clarity and simplicity

I need help to make sense of an ever more complicated financial world and I’m looking for someone who can keep things clear and simple for me.

In practice - the Planning for Life solution

Hanna is in her mid eighties. She was widowed fifteen years ago. Her husband was a company director based in Stratford-upon-Avon, where she still lives. Her married daughter, a solicitor, lives nearby and has three children who have embarked on their own careers in the UK and overseas.

Without her husband, Hanna had to take control of her money, a role her husband had carried out until his death. She shortly became disillusioned with her provincial stockbrokers, and was put in touch with Planning for Life by her accountant.

In our first two meetings we gave Hanna the opportunity to talk about herself. She told us of her grief at the loss of her husband, the joy of her grandchildren, her fears over her financial security and her determination not to let the death of her husband leave her “housebound”. In particular, she told us how she wanted to travel with her friend, also a widow of a similar age, and visit her grandchildren in various parts of the world.

It became clear that Hanna had two conflicting objectives: the protection of her wealth to ensure it “outlasted” her, and her need to spend money on living. For our part, we helped Hanna also to understand the threats of inflation / longevity and financial market volatility. Then at the third meeting we presented a strategy to her that would help her deal with all these issues.

The first part of the strategy looked at cash flow. We helped Hanna cost out her desired lifestyle, including a substantial budget for travel. This showed that Hanna’s expenditure would exceed her income from pensions. The shortfall would have to be made up from her investment portfolio and we showed that, given a certain level of long term investment returns her capital would be sufficient to meet her needs, although it would lead to a controlled depletion of capital in real terms (see cash flow diagram left - the purple bars show the value of one element of her portfolio over time, with the lighter bars below showing liquid capital over and above her house, held as a reserve for long term care costs).

Next we talked to Hanna about risk, and worked out how to structure her portfolio so that it would provide her with liquidity when needed irrespective of stock market volatility, whilst also providing some protection against inflation (see the “Cascade” diagram (right), based on an idea originally conceived by the late Tony Shephard CFP).

This was an iterative process of balancing risk returns and expenditure, but we eventually helped Hanna to achieve all of what she wanted to do with confidence and without the worry about her long term security that had plagued her till now. In particular, she has been able to take a number of extended, long-haul holidays to many parts of the world, she has visited her grandchildren and helped them through their education and early careers. Above all, she has remained confident her money will not run out, even in the recent volatile conditions, and has no concerns about funding help in the home if it becomes necessary.

This case study is based on one of Planning for Life’s actual clients, although names and some circumstances have been changed to protect our client’s privacy.

 

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