Top three tips for... retirement planning

Posted on May 23, 2019

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In this new series of blogs, members of our team will discuss their ‘top three tips’. First to contribute is Partner Andy Kirk, who reveals his top three tips for retirement planning:

Tip one: Understand what you’ll need

Many people have no real understanding of how much money they will need to see them through their retirement and most don’t take into account that this period of their life could last for up to four decades. We therefore suggest that you take time to work out how much income you will need in retirement and where that’s coming from. And, in the run up to slowing down, it’s also sensible to reduce debts to a minimal level.

We are there to help you with your investment strategy and while that will be different for every client, we’d certainly encourage you to avoid putting ‘all your eggs in one basket’ and would probably suggest that you diversify your assets.

So, more simply, exactly how much is invested in each asset class, i.e. equities and fixed interest and market sector depends on the current economic outlook, your target return, the likely investment term and your appetite for, and tolerance of, volatility. We also generally advise that a pension investment strategy in the years leading up to retirement should reflect the basis upon which benefits are likely to be drawn in retirement.

Your age will also affect how risk adverse you might be. Pension plans are different to other investment products because you cannot access your funds until age 55 at the earliest and you will probably not need to draw any funds until you reduce your working hours or stop working completely. In our view, this means you can probably be less concerned with volatility while you are six or so years away from retirement.

Tip two: Write a ‘bucket list’

Sometimes our clients feel cautious about spending their retirement funds when they’ve been so used to an income for many years and then it stops. However, retirement could potentially last for 40 years, so it’s a good idea to have some hopes and dreams for that period of your life.

We encourage our clients to tell us about how they see their retirement and everyone is different. Some people really do want to wind down and ‘potter around’, while others have set their sights on an adventure.

It really is a case of making a ‘bucket list’ and sharing it with us – then we’ll support you to help you achieve it. Life really is about making memories.

Tip three: Five years before, review

About four or five years before you anticipate slowing down, it would be sensible to review your sources of retirement income. You will need to ensure that you have accumulated the right level of capital, in the most tax efficient vehicle and invested coherently for the medium to long term returns.

At that time, you should also consider how you are going to draw your benefits. If you expect to purchase an annuity with some of your pension funds it's sensible to reduce the exposure to investment risk as you approach retirement, to provide some certainty as to the emerging level of benefits.

If it's more likely that you will draw benefits directly from the pension fund i.e. flexi-access drawdown, then the pension fund will remain invested. The continuing arrangement would then require regular monitoring and investment reviews.

It is vital that we understand your objectives and requirements before providing guidance on the options which are available, and suitable, for your circumstances.

Andy Kirk joined The Goodman Partnership in January 2012, becoming a Partner in 2015. His role is as an investment specialist advising clients – mainly at or approaching retirement – who are looking for wealth management as well as those who need advice on funding for care fees.

Andy is a Chartered Financial Planner and Associate of both the Personal Finance Society and the Chartered Insurance Institute, as well as being an accredited member of the Society of Later Life Advisers (SOLLA). He was awarded the Later Life Adviser Accreditation in December 2013 and, in January 2016, was awarded the SOLLA Retirement Advice Standard. In addition, Andy is an Affiliate of the Society of Trust and Estate Practitioners (STEP).

 

 


Goodman Chartered Financial Planners is a trading name of Fairstone Financial Management Ltd. Fairstone Financial Management Ltd., is authorised and regulated by the Financial Conduct Authority – FRN: 475973 Registered in England and Wales no: 05574120. Part of the Fairstone Group. Where you have a complaint or dispute with us and we are unable to resolve this to your satisfaction then we are obliged to offer you the Financial Ombudsman Service to help resolve this. Please see the following link for further details: www.financial-ombudsman.org.uk.