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Four challenges affecting retirement year investments

05/12/2016 … Author:

When it comes to retirement, whether we’re looking to put our feet up, travel or undertake challenges like sailing across the Atlantic, how we manage our finances is crucial to the lifestyle we want to live. The importance of proper planning and selection of the right retirement product and/or investment strategy cannot be underestimated.

There are four key elements that will challenge any retirement investment strategy, and which need to be planned for. These are:

1. Longevity
Statistically speaking, our chance of living longer is increasing and poses numerous questions not least, for how long we will be drawing from our pension savings? Where we put our money, the risk that we are prepared to take with all or some of it and balancing regular income with the potential need to grow capital for a longer period, are all factors we must consider.

2. Flexibility
We must recognise that our needs and, therefore, the demands upon our investments, may change throughout retirement. Balancing the potential need to access a pension fund because of unforeseen events, for example going into long-term care, with receiving a regular income over what could be decades of retirement. In addition, we need to consider the most efficient order to draw down pension income or other savings in terms of preserving capital and tax planning.

3. Inflation
Low interest rates on cash accounts have meant that, over the past 8 years, inflation has had more of an effect on people in retirement than any other group. The right
investment approach, looking at alternative ways to create an income stream, can help manage this.

4. Volatility
Staying invested in the stockmarkets will mean being subject to their inevitable ups and downs over time. Having a long- term plan and spreading the risk through diversification in a portfolio is important, as is, in our view, mixing product sets, including actively managed investments alongside those that can help protect capital while also providing known returns at set future dates.

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