How “memory dividends” can really enhance your retirement years

If you are saving hard for your retirement, you may be reluctant to make a big financial outlay on a once in a lifetime experience. Instead, you might be entirely focused on setting money aside for your future needs.

However, I’ve long thought that sometimes spending money on an experience to create lasting memories can often be just as important as saving for your retirement itself, once you’ve set enough aside to ensure your financial needs in retirement are covered.

This is often referred to as creating “memory dividends”, and in this article you can read why that’s the case, and why it’s so important to ensure that you’ve accumulated your share of this type of dividend.

Living comfortably in retirement will likely be a top priority

It’s important to make it clear that your overriding priority as you plan for your retirement is likely to be to ensure that you’ll be financially secure and have sufficient income to provide you with a comfortable standard of living after you stop working.

As you will read, accumulating memory dividends both before and after you retire is a good thing, both in terms of enjoying experiences and creating long-lasting memories. However, you want to avoid a scenario whereby spending excessive amounts on experiences results in you detrimentally affecting your future standard of living.

But once you’ve taken steps to secure your future, you are then looking at making the most of your retirement years, leaving no regrets for things you didn’t do.

Creating memory dividends to last for the rest of your life

The idea of a memory dividend naturally comes from the concept of the dividends you can receive on certain investments.

Investment dividends can play a key part in helping you grow your wealth up to and into your retirement years.

Dividend-paying companies will usually make an annual declaration of dividends to shareholders, which will result in a bonus payout based on the number of shares you hold, rather than the value.

While these are not guaranteed, many large companies will declare them. These dividends can quickly help boost your investment portfolio if you reinvest the money into the purchase of additional shares, which then attract annual dividends themselves.

As a result, investment dividends will continue to provide you with potential gains, long after the initial declaration was made.

A memory dividend will work in a similar way. As with investment dividends, you will need to invest in order to gain the dividend, in terms of time, effort, and financial outlay.

But not only will you enjoy the activity in the first place, but each subsequent reminder – be it through looking at a photograph or talking to a friend – will provide you with another happy memory. Furthermore, those memories may well be as strong on first recollection as each subsequent one.

As soon as you have decided that memory dividends are something for you to seek out and to treasure, it’s worth spending some time considering how and when you want to accumulate them.

Here are three suggestions I would make with regard to how you might want to go about this.

1. Set money aside for memory dividend acquisition

While many of your memories may be derived from activities that are relatively cheap, clearly it’s likely to be the case that the once in a lifetime unforgettable moments and events will occur as a result of a large expense. They might often involve overseas travel, too.

You may already have a savings pot, or a long-term investment fund, earmarked for this type of holiday, so it will be a simple matter of adapting it for the acquiring of memory dividends.

The best way to build a fund is with regular savings. I’m a strong advocate of “paying yourself first” by having money earmarked to secure your future leaving your account at the same time as your salary appears in it.

I would suggest that setting money aside for memory dividends very much comes under this heading.

2. Make a list, and then prioritise

Once you’ve decided that you’re going to focus on memory dividends, the next job is to set out exactly what these will be, and when you are going to do them.

You may already have a bucket list that will make a good starting point.

Part of your prioritisation is likely to revolve around how active you are. For example, if you’re planning on a white-water rafting trip, or trekking to Machu Picchu, these may well be events to schedule when you are younger and fitter.

Less strenuous activities, such as visiting historic sites or watching sporting events, can then be lower on your list, as your physical fitness will be less of an issue when you fulfil these.

It’s important that you undertake these activities because they matter to you, rather than because others always talk about them, or you read about them in a Sunday newspaper. In that way, they are more likely to produce memorable events and moments.

Furthermore, you may only have a limited amount of money to spend on memory dividend accumulation, so you need to be sure you are investing this wisely.

3. Ensure your family are involved

The people you choose to undertake your experiences with will clearly share in it and create memory dividends for themselves.

There’s no reason why you shouldn’t want to help your children build their own portfolio of memories. Sharing experiences with them will pay dividends (excuse the pun!) in terms of creating lasting memories for them as well.

Clearly, it’s not comfortable thinking about what will happen when you die, and it’s not something to look forward to when you are so active at the present time.

But by creating memories and experiences while you can, you can look back with both happiness in that you ticked those events off of your list, and pride in that you shared them with others.

You may well choose to see these shared experiences as part of your legacy planning. Indeed, you might even want to use some of the assets originally earmarked as for an inheritance to acquire memory dividends, both for you and your intended beneficiaries.

Get in touch

If you’d like to talk about your own retirement plans, and the memories you are looking to create, then please get in touch.

You can call me on 07769 156 250.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments 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.

Equity investments do not afford the same capital security as deposit accounts.

The Financial Conduct Authority does not regulate taxation and trust advice, National Savings products or deposit accounts