Are you planning to retire before your state pension starts? If so, then I encourage you to watch this video.

In this video, I explain an important adjustment that can impact the success of your retirement – particularly in those early, vulnerable years. I go over a real-life style case study of a client (obvioulsy real name removed!) of Anna. Anna is currently 62-year-old who has recently retired with around £500,000 in her pension and other retirement assets.

Anna’s situation is a common theme I often see with retirees. She has formally left work and her State Pension, her only source of guaranteed income, starts at 67. This means that Anna will need to rely on her retirement portfolio (money purchase pension, cash etc) to generate an income to fund her lifestyle. It means that she is taking larger withdrawals from her portfolio until her State Pension begins. This is a crucial zone for retirees.

The key for Anna is to understand and manage ‘sequence of returns risk’. This is the risk of having poor investment returns early in retirement while also making portfolio withdrawals. For Anna, any any retiree, this can be devastating for her retirement as she is withdrawing when her portfolio is down (essentially selling at a loss). To help Anna manage this, we look at creating a bespoke portfolio of both growth assets and defensive assets.

If Anna sets aside a couple of years of essential spending in lower-risk assets such as fixed income or bonds, she gives herself a ‘war chest’ of secure and stable investments to withdrawal from when markets are volatilt. This helps reduce her anxiety and providers her some peace of mind that her retirement plans are more robust.

If you have any questions about your own retirement planning, then please do get in touch.