Putting your retirement dreams on ice may not be inevitable if you plan carefully now.
It is important to plan your finances carefully in the run up to retirement, but coronavirus will have thrown many people’s schedules into disarray.
Stock market falls mean that those who are already using pension savings in income drawdown, or those who are about to stop working or gradually reduce their hours to retire in stages, may face unexpected circumstances, or fear running out of money altogether.
With expert help, it’s possible to get your finances back on track. Here’s a five-point plan:
- Assess the damage
Stock market falls can be scary, but they do not have the same effect on everyone’s portfolio. Many older people’s investments are ‘lifestyled’, which means that less of the money is in riskier equities and more is in bonds. Although every asset fell in the corona panic, they have not all fallen equally - and bonds have not been as badly affected.
- Plan your spending and budgeting
It’s likely that the stock market will recover in the long term, so if you can avoid selling the assets that have been most affected now, you may avoid realising corona losses. An adviser can help you restructure your day-to-day spending, so that you perhaps use cash savings for a while, and wait until the market recovers to draw down more from your pension.
- Rebalance and lifestyle your investments to ensure future security
As mentioned above, most investments have fallen in value, but not all at the same rate. Talk to your adviser about your portfolio. If you do not already have one, now is the time to get the experts involved, to reposition your portfolio for recovery and so that it’s in line with your goals and risk tolerance.
- Ensure any losses are used tax efficiently
If you have made any losses from selling shares, you can make sure you use them to offset other capital gains that you have made on your next tax return. An adviser will be able to help you ensure this is done as tax efficiently as possible.
- Talk to the rest of the family - and an adviser- about multi-generational financial strategies
Many people approaching retirement feel the burden of providing for the next generation, for example, helping a child onto the housing ladder, or supporting with a grandchild’s school fees. If your finances have been hit in the short term, you may feel these plans are in jeopardy.
An adviser will be able to help with cashflow modelling, which should help you to see how feasible your plans are now, and can also suggest restructuring your finances with the future in mind. This could include making a new will, which may allow you to hand down money tax efficiently at a later date, while still allowing you the funds you need to retire comfortably.
Speaking to an expert independent financial adviser could be an important step in ensuring your retirement plans aren’t derailed while offering the support and guidance you need to take the right action.
This article is for generic information only and is not suggesting a suitable investment strategy for you. You should seek financial advice that takes your individual circumstances into account prior to proceeding with any course of action.