Risk and balance: investing during retirement
Why it’s important to keep your portfolio working for you

 16 October 2020
Risk and balance: investing during retirement

You’ve finally made it! You’ve worked hard all of your working life to save and prepare for your retirement. You’ve built up a pension pot, and a portfolio of investments. And now you’ve finally retired. You should be proud of yourself - retirement is a major accomplishment!

Investing during retirement

As you’re no longer earning a salary, what's your strategy or attitude towards investing? After all, you may live more than 30 years in retirement, thanks to  rising life expectancy. You may have taken advantage of increased incentives to quit work early, or been made redundant late in your career and not want to return to working, giving you extra time in retirement.

The longer the time spent in retirement, the harder it becomes to be certain about the adequacy of your assets. With the right strategy in place, you can help make sure your retirement savings last, and ensure you don’t outlive your savings. 

Boost your retirement income

If you’ve been contributing to a private pension, in effect you’ve been investing for decades to earn enough money to retire. You probably have other investments, from ISAs to shares, and assets such as property. When you retire, your investment risk profile and strategy will almost certainly need to adjust in order to look at ways of making your money work as hard as possible. Instead of just living off savings, you may want to generate income to boost your retirement income.

Time of your life

The key is to enjoy retirement while making sure you don’t outlive your retirement savings. For many retirees, that means developing an investing strategy that will allow them to withdraw money from their portfolio, while still enabling it to grow over the longer term.

Keep the balance

There are a lot of ways to invest even after you have retired and your working days are done. First, you need to know what you’ve got in place already, and how much you might need to live the life you want.

  • Conduct a review of all of your investments
  • Decide how much you can afford to withdraw each year and whether this balances with your needs. 
  • Look at how balanced your investments are
  • Check that you are not exposed to more risk than you are comfortable with 

Potential investment options

Many retirees develop an investing strategy with help from a financial planner or advisor that will allow them to withdraw money from their portfolio, while still enabling it to grow over the longer term. Given the potential investment options available to post-retirement retirees, at the point of investing, it’s really important to consider the effects of future financial market volatility and inflation.

Risk: adverse or addicted?

Some retirees view their portfolio with an element of finality - “this is the sum total I’ve got to last me from now on”. This makes them too risk-averse and unwilling to look beyond their current financial position. 

Some retirees have invested all their lives, and enjoy the whole process of investing - including an element of risk. It can be a hard habit to break, and in reality, there is no need to. You can continue to invest in retirement, and enjoy it too, but it would be unwise to take on unnecessary risk that might adversely affect your current portfolio value. You might wish to ‘dial down’ the level of risk you had previously taken, so you can spend less time worrying about the stock market and more time travelling, pursuing hobbies, and spending more time with family and friends. 

While the risk of portfolio declines can’t be overlooked, as a retiree, you also face another type of risk: inflation. We may currently have historically low inflation, but it’s still critical for your investments to keep up with inflation throughout your retirement years. On the other hand, cutting exposure to equities too aggressively could hinder the growth of your nest egg, potentially leaving you with less than you need.

Keeping up with inflation

They key is to make sure a good portion of your investments is in safer assets. Today’s low interest rate environment means your money may not grow quickly, or even keep up with inflation, but those assets will likely be better protected than equities in a market downturn.

Many retirees therefore hold a healthy mix of equities, bonds and other investments, such as property. The right mix will depend on your circumstances and your personal risk tolerance. At Panthera Wealth,we can help set up your portfolios in a way that better protects the funds you may need in the next five years, in the event of future stock market corrections.

Decide to diversify

Diversification is important for investors at any age, and may be most critical when investing in retirement. Retirement is a time of your life to ensure that you spread your investments across and within asset classes. You can spread your money across the three major asset classes, known as ‘asset allocation’.

  • Equities
  • Bonds 
  • Cash equivalents

To balance the risks and returns of the asset classes – and the investment within the asset class itself – you can also spread your money across various investment options within a particular asset class.

Increasing financial security

Making the right investment decisions can help you increase your financial security and provide income that you can use to live comfortably after you stop working.

Want to discuss investing for retirement or making your retirement funds go further?

Contact us here at Panthera Wealth. We’re a local, friendly firm with a single goal, to help you fulfil the lifestyle you want and deserve, and to live it without the fear of running out of money. 

Call: 023 9226 8969

Email: paulhammond@pantherawealth.co.uk

Contact us for a no-obligation online consultation

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I've known Paul for over 5 years. Paul is friendly, relaxed and a pleasure to deal with. He is extremely knowledgable and serious about financial planning which makes the process stressfree and I feel very confident about the plans in place to maximise my income, particularly during retirement.