We’re reading and hearing a whole host of views and studies pointing to individuals now having to delay their retirement or having to work longer because of the fall in the value of their pension and assets.
Firstly, this made us very curious as any fall in the value of a Global investment strategy has now just about recovered to its value pre-March 20’. So, we can only assume people are adopting a very biased and lopsided UK investment strategy, which is currently still approximately 20+% lower than pre-March.
But simply looking at asset values shouldn’t determine the answer to delaying or changing any of your future plans.
There are many parallels between flying and your own financial plan, “Financial planning is like being an airline pilot. You need a flight plan, must know where you’re going, check all of your gauges and make corrections when you run into turbulence” (Ben Carlson).
Accepting we’ve now entered a spell of turbulence, what are you going to do?
We’d recommend revisiting your own plans to check whether you are off course and whether any changes are required.
We’ve all read stories about the importance of “course corrections” and how, for example a very small error in course coordinates can lead to tragic and devastating consequences, as told in this tragic story about an Air New Zealand flight to Antarctica.
So, avoid making any decisions or changes purely based on simple asset values and ask yourself the following 10 questions;
- Have I tested my plans to check what slightly lower lifestyle spending, as a result of asset values falling, might mean? Could I still stop work when I want to?
- Have you tested your future plans using lower investment returns and whether this would change anything?
- Could you still stop work if you change your current investment strategy and potentially increase your future investment returns?
- Has the current crisis shined a light on your current investment strategy and you now feel uncomfortable with the risk you are taking?
- Could you stop full time work and possibly work part time and keep retirement plans on track?
- Have you considered a “right size” property change later in your plans which could now keep your retirement plans on track or have you modelled some release of the equity in your property to support your ideal future lifestyle?
- Have you checked if you can take more cash lumps sum and less income at retirement from your Defined Benefit pension and whether this could help your plans e.g. repaying debt now and living off a lower income?
- Can you revise some of your intended luxury/discretionary spending and still make stopping work realistic?
- What’s the impact of making less provision for retirement, have you modelled this?
- Do you know what average annual investment rate of return you need from your investments or pensions to ensure you never run out of money? Is that average return pessimistic, realistic or optimistic?
If you have any questions about your current retirement plans or would like to discuss putting a plan in place then please get in touch with us.