Financial planning in your 70s

Whether or not you're fully retired, financial planning should not stop in your 70s. Hopefully you’ll be able to enjoy the financial security that’s come from your hard work and careful planning, but you’ll need to balance living comfortably with preparing for life’s unpredictable events such as illness or care needs. That’s why making the right decisions can be crucial in using your savings and investments in the most efficient ways.

In your later years you’ll also be thinking about what you can give to others now and in the future, as well as organising your assets to help make sure your family don’t pay more inheritance tax than they need to.

Everyone’s path is different, with varying levels of resources, but there are some common priorities and steps to take at this life stage. However, it can be confusing to know where to start, so here’s a list of key areas to focus on to help ensure your finances are in good shape for your 70s and beyond.

Tips for financial planning in your 70s

1. Determine the best way to draw on resources

Once you reach your 70s you have probably either fully retired or reduced your work commitments, or have at least looked at doing so. You’ll therefore be living mainly from income from pensions and investments, and if you have been retired for a while you will likely have a good feel for the balance of your income and expenses.

However, that doesn’t necessarily mean life is easy. The past couple of years have shown that market volatility can undermine investment goals, and if you are drawing on your assets it’s really important to regularly check whether your strategy is appropriate and the amount you are taking out is sustainable.

In particular, upping withdrawals, or even continuing to take the same level of income, during periods of market stress can mean a portfolio drains much quicker than anticipated, making it very difficult for it to recover. It’s important that poor returns and taking too much income don’t combine to drain a retirement pot, something known as ‘pound cost ravaging’.

Adjustments may therefore be required to help control volatility, but it is also important not to become too risk averse. A healthy person in their 70s may live for another 20 to 30 years, so there’s always the corrosive effect of inflation to stay ahead of, and this is usually best achieved by investing rather than parking too much in cash. Tax planning is also important and the efficient withdrawal from different sources can help reduce the amount you pay over your lifetime.

2. Focus on future proofing living arrangements

Declining health can be a worry during this stage of life, and you might be thinking of how to simplify your lifestyle or move somewhere more manageable. This could involve downsizing, which can have the additional benefit of releasing capital to help provide income, or you could make changes to your existing home to make it easier to live in and maintain.

Moving out of a long-standing family home can be highly emotional as it means leaving behind precious memories, so it is common to put this off as long as possible. However, this has to be balanced against the practicalities of continuing to live in and look after a larger property, which can become an increasing burden as time goes on.

3. Think about succession and inheritance tax planning

An unfortunate but necessary part of everyone’s financial plan is to consider what you want to happen to your assets when you are gone. If you have not already done so, now is the time to start thinking about how you want to pass assets on to loved ones alongside inheritance tax (IHT) planning in order to make things more tax efficient.

These days you don’t even have to be that wealthy for the taxman to take a slice of your estate. IHT is paid on the value of an estate when the owner dies, but there are various ways to reduce a liability such as making gifts or setting up a trust. Follow the link to find out more about how inheritance tax works.

As part of your legacy planning you should also make sure your will is up to date and that it reflects your current circumstances and wishes. You should also put in place a Lasting Power of Attorney (or a Continuing Power of Attorney in Scotland), especially if you are in poor health. LPAs allow appointed ‘attorneys’ such as a relative or friend, who is ideally younger, to carry out your wishes if you become unable to do so yourself due to illness or mental incapacity.

4. Start considering medical and care costs

Retirement spending tends to be ‘U’-shaped. There’s often an initial burst of expenditure during the earlier, more active years when you want to live life to the full, and then higher costs in later life as health and wellbeing issues typically become more prevalent. Even if you're healthy and living a lifestyle you've enjoyed for years, there is still the chance a major illness could set you or your loved one back, so planning for additional healthcare expenditure and later life care should be considered alongside those once-in-a-lifetime experiences.

Funding the fees for long-term care can be particularly complex and expensive, and it is important to consider the possibility of requiring it and the options available.

Give your finances a health check

This article is just the tip of the iceberg. There can be multiple factors to unpick and prioritise during your 70s with an uncertain trajectory of expenditure and other considerations such as tax. Yet with some careful planning you can secure your financial future.

You also don’t have to tackle it on your own. Having a conversation with a financial professional can help you to take control of your finances, giving you freedom and peace of mind. To get you started our OneStep Financial Coaching allows offers an educational session based on the topic of your choice so you can get the most out of it. We offer a free, no commitment, 15-minute call with a qualified professional to discuss your needs, and after that each one-hour coaching session is charged at a one-off fee of £150 (including VAT).

Importantly, all our financial coaching is provided by regulated and qualified financial planners who work for Charles Stanley, a regulated company. Not only will you benefit from more formal experience and qualifications, but if your financial coach believes you would benefit from more comprehensive guidance, or even full financial advice, they will refer you to an advisory service.

Find out more