Retirement planning: The gift of control in an uncertain future
More than simply building wealth, retirement planning offers you the gift of control. Learn the strategies and tools, like cashflow modelling, which can help you achieve peace of mind during the next chapter of your life.
Nearly half (47%) of UK adults believe that their retirement outcomes are largely influenced by factors outside their control, according to a Pensions Age report.
Rising living costs, investment volatility, and life’s unexpected twists and turns can easily knock your financial confidence if you are unprepared. These unpredictable factors might feel impossible to plan for and may even cause you to delay your retirement unnecessarily.
A bespoke retirement plan makes sure that you are prepared for whatever might come next.
Continue reading to learn how to build resilience within your retirement plan and practically prepare for the unexpected.
A solid investment strategy can help you successfully manage market volatility
Market volatility can cause your retirement fund – including your private pensions, Stocks and Shares ISA, and any other invested money – to rise and fall in value.
A recent example is the market turbulence because of the outbreak of war in Iran and the surrounding nations. This saw the S&P 500, a US stock index, fall by about 8% from 28 February to 30 March, CNBC reports.
Investing, by its very nature, carries risk. Even with a foolproof plan, your investment growth won’t be linear; performance is entirely based on market values, which will fluctuate over time.
When you put a strategic retirement plan in place with us, we can help you balance the amount of risk your investment portfolio takes on.
Diversification spreads your wealth across different asset classes, markets, and geographical locations. So, if volatility causes one of your investments to lose value, another might rise.
For example, while US stock prices dipped in response to the outbreak of war in the Middle East in March, Reuters reported that gold reached a high of $5,297.31 an ounce on 2 March. Note that this is just one example of countless different asset classes having varied responses to the same world event – if your portfolio is diversified, it could remain broadly stable.
Likewise, a long-term outlook can help you weather periods of volatility. While events might cause your investments to fluctuate now, with time they could stabilise and rise to their previous values. In fact, markets are historically known to trend upwards over time, despite short-term movements.
A professionally advised strategy won’t make markets any more stable, but it will provide an element of reassurance that your retirement plan is in experienced hands. It could even prevent you from making rash decisions in reaction to market movements or concerning news headlines.
An emergency fund offers a cash buffer against costly surprises
Your pension will likely form the basis of your retirement wealth. Therefore, it’s easy to think that you can simply withdraw more from your pension to pay for costly surprises, such as:
- A leaking roof
- A broken boiler
- Car repairs
- Helping a loved one with an emergency cost
- Private healthcare needs.
However, the timing of your pension withdrawals can affect how much income you receive from them (selling during a market downturn can mean you receive less value from your investments, for example).
Likewise, drawing too much from your pension at once could incur an unexpected Income Tax bill, with larger withdrawals subjecting more of your wealth to the higher and additional rates of tax.
An emergency fund can help you mitigate these risks – easy-access cash savings usually equalling one to three years of essential living expenses, but the amount is based on your specific risk tolerance and lifestyle. This cash buffer ensures that you have funds on hand to deal with unexpected outgoings (and the peace of mind knowing it is there).
Likewise, you can rely on your cash savings to support you until markets recover. For example, if you had retired in March 2020, you may not have wished to draw from your pension when market values crashed over the short term. In this case, it might have been appropriate to draw on your emergency fund until the value of your pension rose again in the subsequent months.
Cashflow modelling helps you visualise various scenarios for the future
In financial planning, we use cashflow modelling to help provide more accurate, data-driven predictions for your wealth.
Cashflow modelling uses your current financial data, historical trends, educated assumptions, and probability to map out how your finances might take shape in the future. This can reassure you that you are on track to reach your goals and that your future remains firmly in your hands.
You can also plug in “what-if” scenarios to cashflow modelling software to visualise how your wealth might be affected.
For instance, if you’re concerned about how divorce could impact your retirement fund, your cashflow model can map out how your assets will be split and whether this will negatively impact your goals.
This software is also useful for exploring your options when you receive a windfall, such as a financial settlement from a previous employer or an inheritance.
With these various paths mapped out in front of you, cashflow modelling allows you to walk through each one so you can understand how you might be affected and how you might gain control over the outcome.
Get in touch
Our team of experienced financial planners will provide you with the tools, confidence, and reassurance to gain as much control over your future as possible.
Learn more by emailing us at hale@kelland.co.uk or calling 0161 929 8838.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate cashflow planning or tax planning.