How to retire in Uncertain times – A Wealth Managers view.

If you have been planning on retiring within the next few years, it’s very likely that you feel like the current chaos has caught you off guard.

However, just because we are seeing large amounts of uncertainty and volatility in the markets, that does not mean it’s time to sit back and wait for all of this to blow over.

Now more than ever, it’s time to get your financial future back on track and able to provide what you want it to when you retire. In this blog, we’re going to review some of the key considerations we as Wealth Managers feel like you should take when it comes to your retirement.

Understand what you have, need & want – 

The most important thing to consider when making decisions on your pensions is to know what you have, what you’ll need, and what you want. To understand what you have, check your existing pension plans, the funds inside them, and the policy attached to them. Also, ask yourself – how much can you save each month? Where are you spending your income? Can you put more towards saving for the future by cutting back on spending now? In times like these, it’s always a good idea to make sure you have comfortable savings to fall back on. By doing all of this, you will have a much better idea on where you stand financially. This will help you understand the options available to you when it comes to retirement, and also help you make better decisions when adjusting your investments.

To understand what you’ll need, consider what your essential spending will be, and the income you need to cover your living costs. This should include any lump-sum costs like outstanding loans or mortgages. This will give you a good idea on whether your pension will be enough to live on. Also remember to include your entitlement to your state pensions if you haven’t already, as this could go some way in covering some of the essential living costs you have, but remember this could change in the future.

The last thing to look at is discretionary spending. This will cover the type of lifestyle you want to have in retirement. Over time the markets will go up and down; as we’ve seen with the recent market drops, which means that you might need to make a few changes to your discretionary spending in the short term. However, these are truly unusual times and won’t last forever, so the markets will recover. When considering discretionary spending, you should also look at any lump-sum spending you plan to do, like gifts to family or new properties.

Carefully consider when to retire – 

When making decisions with your retirement, you should carefully consider when to retire. In times like these, when the markets are uncertain and volatile, it is very possible that your financial situation will not line up to your retirement goals. It’s worth noting that its always possible to push back your retirement age. Although you might be looking forward to retiring sooner, a later retirement age will give you more time to contribute to your pension pot and give the markets some time to cool down and become more stable. It’s actually becoming more common, with more people between 60 and 64 continuing to work instead of an early retirement. Being patient in the short term could very well pay off in the long term, giving you better options on how to use your pension. 

Realise that retirement could last longer than you think – 

The average lifespan is constantly increasing. We are now much healthier and can stay active for much longer. However, this does also mean that your retirement plan needs to account for a longer time period, which means you should invest and save more accordingly. A rule of thumb is that your pension fund should cover 25 years of your desired annual income in retirement. While this can seem like a long time – which it is – saving and investing can help you reach that and ensure that you’ll live comfortably in retirement. A Wealth Manager can help you invest our pension pot in a way that can reach your financial goals, expose you to a level of risk you are comfortable with, and also properly take into account your saving and spending levels. 

Make individual decisions on your risk tolerance – 

To put it simply, if you accept a higher level of risk, there is a greater chance for both big increases and big decreases in the value of your investment. In times like these, investments with higher exposure to risk would have been hit harder by the market volatility, and investments with lower exposures would have had smaller drops in value. However, these higher risk investments are likely to see better growth in the long term, where short-term volatility is smoothed out. The risk you are willing to assume for any of your investments should be carefully chosen and should be reviewed over time too. 

When you have many years until retirement it is arguably safer to take on more risk with your pension pot, because you have more time to realise the potential higher level of growth. However, when you are close to retirement, it is safer to take lower levels of risk because you will have less time to recoup any short term losses, and also you want to be more certain in the final value of your pension. The process of moving from high risk to lower risk funds for your pension over time is called “pension lifestyling” and is a feature of many pension plans. In these uncertain times, you should certainly check your pension; and its lifestyling options, to ensure you feel comfortable to the amount of risk you are exposing yourself to. A well-diversified portfolio will always ensure you have a reliable and risk-efficient investment, no matter which level of risk you choose.

In summary, all of this uncertainty is scary for anyone considering retirement. But we feel that it’s important to remember that well thought out decisions and seeking out expert advice is paramount to giving you certainty in retirement. 

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise.  You may get back less than the amount invested.

If you do feel like you need expert advice, we’re always here for you. To contact us, call us on 01858 791182 or get in touch here.

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If you want to talk this over, simply call us on 01858 791 182 or get in touch here.

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We work with many local business owners and directors across the Midlands, helping them and their families to become financially independent.

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Sovereign Wealth Limited is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website Sovereign Wealth Limited is a Limited company registered in England and Wales, Number 07115386. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.