An unusual part of the job

I am writing this at the end of another year in which I found myself helping people relocate from the UK to retire to Spain. For many, this was a lifelong dream, for others it was a case of simply having had enough of the UK.

The process is now a lot more involved than it was before Brexit, and my role tends to be focused on making sure all of their finances stack up, and being as tax and investment efficient as possible once they arrive. There are certain things to consider before you leave the UK; an example could be taking your pension lump sum in the tax-free environment of the UK, or making sure your house sale doesn’t create tax implications once you become Spanish resident. This typically revolves around the timing of your move here, which can be critical in relation to effective tax planning.

What has really been obvious to me this year with most of my new clients is the ‘unusual part’ of my job that I had not really come across too much in the past. Most people have been used to making money all of their working lives, be it in the form of receiving a salary each month, or making profits from self-employment. But when retirement comes along, income from working suddenly stops and in the case of people retiring to Spain, they suddenly find themselves in a situation where they no longer receive ‘earned’ income. For many, this is a very difficult situation to deal with psychologically, as they become fearful of spending  money.

And this is the unusual part I am referring to, as I find myself spending a lot of time with people running through their finances and expenditure, showing detailed projections of how long their money will last going forward. Of course, it is very difficult as no one knows how long they are going to live, and no one knows what their money will be making going forward, but by making sensible assumptions on both considerations a pretty realistic picture can be painted.

This is the point at which I really emphasise the power of ‘passive income’, and help people to understand its relevance and value. Simply put, even though you have stopped earning money when you retire, it doesn’t mean you have stopped making money. With interest on bank deposits, and growth on investments and pensions, whilst you may be enjoying life relaxing on the beach or playing golf, your hard-earned savings are working away in the background for you. This is why it is so important to keep a close eye on your assets, making sure they are working as hard as possible for you. I always refer to this as passive income.

Over time people become more relaxed about their new situation in retirement, but to start with it can be very difficult to adjust. This is why I spend a lot of time talking with people, explaining that as they ease into retirement this is something that will start to take a back seat in their daily worries, and spending money will become less of a stressful issue. Regular reviews of their financial situation are a great help when it comes to ‘proving’ things will be ok!

If you would like help when it comes to planning your retirement, then please do not hesitate to get in touch.

And let’s hope 2025 is a prosperous year for us all.