Saving and investing for your retirement can be viewed as the biggest financial challenge. Whilst saving for your retirement, you want to maintain a good standard of living at the same time as building a career or business, getting on and up the property ladder, raising a family and perhaps paying school fees. Not an easy journey. So now you have built your retirement pot, and you have reached retirement, can you just sit back and enjoy the money you have saved? Has all the hard work now been done and your financial path much simpler moving forward? Well, unfortunately the answer is no! Arguably in retirement things can become even more complicated as now you have some very different issues to consider.
So, you have built up a retirement fund that could possibly be your largest asset, maybe even more than the value of your home. Having stopped earning an income, you are often relying on a finite savings pot to provide income over an uncertain term. If you retire at age 60, then potentially you have 40 years ahead of you. Before retirement you have a degree of control on when and how much you save as you still have an income. However post retirement, there can be this overriding fear of running out of money which can lead to poor decisions being made, that can have an adverse impact on your retirement plans.
Understanding how much income you can afford whilst not jeopardising your financial future is rarely a onetime decision. What if markets fall? What about the effects of inflation? Will ill health mean expensive healthcare in your latter years? Some people would like to make gifts to their children and grandchildren during their lifetime but this fear of affordability can delay or prevent those gifts being made. Understandably, retirees often feel much less in control than they did when saving for retirement.
Retirement can often require a completely different approach to investing than that taken when saving. As well as determining the level of risk you are prepared to take with your portfolio, the impact of volatility is also vitally important when you are withdrawing money from your investments. A fall in investment markets in the early years of retirement can have a major impact on the sustainability of income. Having the ability to use cash reserves to provide short term income if markets fall could be an option to mitigate this risk. Another important consideration is taxation. The ability to derive an income from multiple tax wrappers, for example pensions, ISAs, collectives, bonds and cash, can mean you pay less tax as you are able to utilise the tax allowances attributable to each wrapper. This can give a real boost to the sustainability of income from your investments. Tax efficiency can also be improved during retirement by the movement of assets between different tax wrappers.
There is probably no other stage in life where there is a greater need for professional advice. Having a regularly reviewed financial plan is essential to help ensure you have a successful and stress free retirement. If you are approaching retirement, or have already retired and want to review your options, let us help you secure your financial future. One that gives you confidence and peace of mind.