Investor or retiree: What do you want from your post-work years?

Retirement income
10 November 2017
How financial advisers can help consumers find the perfect balance between being a retiree and an investor.

Retirement is upon you - it's finally time to relax and enjoy your pension after decades of hard work. Here come the Mediterranean cruises, the holidays with the grandchildren and that conservatory you've always wanted.

But is this actually the reality for UK retirees? Or is retirement the time where they have to turn themselves into investment experts, dredging up those long-forgotten maths skills and spending hours poring over figures? All of that hard work you're so pleased to have formally given up isn't necessarily going to be a distant memory.

Worries about savings don't end with retirement

The average person entering the world of work at age 21 and retiring at 65 spends 44 years in the workplace. That's four decades in which they can pay into a pension fund, buy stocks and shares and weigh up their annuity and drawdown options for the future. Once they retire, that should be the end of it, right?

Not necessarily, as recent research carried out by Hargreaves Lansdown highlighted. The financial services firm found that an individual who retired in 2000 with £100,000 in their pension pot would have completely ran out of money by 2014 if they had been withdrawing just seven per cent (£7,000) of their savings each year. With people living for longer than ever before, the average retirement lasts for considerably longer than just 14 years these days.

Hargreaves Lansdown warns that people in a similar situation withdrawing five per cent or more each year from their pension could be left facing poverty by the time they reach their 80th birthday. But what do they do then? They'll most likely be too old to take on another job, they may have additional grandchildren to support and their care needs may require paying for too.

Ending their days in relative poverty would be a horribly undignified end for workers who have spent years saving into a pension fund. But is there an alternative to enjoying the money you have saved while trying not to worry too much about finances?

Swap the retiree hat for an investor's one

In reality, the only alternative is for retirees to be particularly financially savvy and have their finger on the pulse of all of their stocks, funds and shares all of the time to ensure they are continuing to generate the best returns possible, as well as having regular reviews with an adviser.

Retirees wanting to boost their income would also have to stay on top of any political changes, rate increases and the general performance of the wider stock market to keep abreast of the latest goings-on that could affect their funds.

This sounds like anything but relaxing for a hard-earned retirement. Surely after decades of work, consumers should no longer have to spend hours reading the financial pages and trying to find the best investment opportunities - all of this leg work should have been done years earlier and be generating returns by this time.

This doesn't sound appealing, but neither does running out of money by the age of 80, so what's the solution?

Financial advice: A happy medium?

There are already plenty of financial products for consumers to choose from that, with careful saving, can continue to generate strong returns for years to come.

Hargreaves Lansdown may have warned that withdrawing more than five per cent a year from a pension could soon lead to money running out, but this is not far off the rate that a typical annuity can provide at the age of 65 anyway, so is it really worth worrying about and is a better option to simply make the best of all the products available?

Perhaps, as long as savers are placing their money in different funds and not simply putting all of their eggs in one basket, as the adage goes. Having money coming in from several sources in retirement will help consumers to feel more financially comfortable. However, these avenues should be chosen years ahead of time so that people can spend their retirement as a relaxed retiree, rather than as an investor.

With so many options to consider, soon-to-be retirees should always seek professional, regulated financial advice to ensure they are making an informed decision about their retirement income. Specialist providers can often guarantee even higher incomes where additional personal information is given with regard to annuities, too.

This attitude shouldn't end once they are retired either. After all, an occasional appointment with a financial adviser isn't anywhere near as time-consuming or stress-inducing as spending hours every day poring over the financial pages.

© 2017 Axonn Media Ltd. All rights reserved. Any views and opinions expressed in news articles are not those of Just Retirement Limited, Just Retirement Money Limited or Partnership Life Assurance Company Limited. News supplied by Axonn Media.

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