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Retirement: How To Plan Effectively Even During Challenging Times

18th July, 2022

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Retirement: How To Plan Effectively Even During Challenging Times

Given the gloomy state of global financial markets, it’s perhaps unsurprising that international savers for retirement – from those planning to retire in 10 years to those with shorter time horizons – are feeling anxious. But what steps can you take to adapt your approach to your retirement portfolio while financial conditions are less than optimal?

Regardless of market conditions, the most important element of effective retirement planning is to have a detailed plan that reflects your long-term financial objectives and circumstances – and to revisit it regularly. And while you need to be aware of current challenges – and explore flexible solutions to overcome them – you shouldn’t be tempted into knee jerk reactions that might negatively impact your long-term plan.

With the right approach, you’ll be in a strong position to ensure that your investment portfolio is optimised for retirement despite challenging market conditions. In this post, we explore best-practice strategies to help you through turbulent times.

Review your retirement plans and spending habits

Review your retirement plans regularly

Everyone’s personal circumstances are different. But whatever your retirement goals and timelines, it’s essential to review your plans regularly – especially during challenging times.

Increasing living costs and falling investment prices make this an opportune time for you to direct more of your funds into investment, if you’re in a position to do so. For those planning to retire in 10 years or more, it’s useful to think of current bear market conditions as a sale, enabling you to buy more units of the same funds at a lower price – with the possibility of a greater return on your investment than units bought during a bull market.

In other words, the market sell off is beneficial if you have time before your planned retirement date to enable markets to recover. Inevitably, the situation is more complex for those with a shorter-term horizon to retirement.

However, regardless of your planned retirement date, awareness is key. Becoming more conscious of your current financial circumstances in the context of unfavourable conditions means you’re able to adapt your current spending habits as well as your longer-term plan.

Ensure your retirement portfolio is well diversified across asset classes

A well diversified retirement portfolio

When it comes to planning, it’s crucial to think about the levels of income you’ll require at different points during your retirement. Remember, you’ll probably want to spend more in early retirement, as this is likely to be when health is on your side.

With this in mind, a retirement portfolio should be well diversified across asset classes, and should always include:

  • Low-risk investments – inflation-linked bonds such as gilts, for example
  • Property, equities and alternative investments – to help fend off inflation and offer different levels of income at different points of life

With this approach, rent from a property portfolio could provide a monthly income to live on, for example, while shares can be sold for one-off events, like that dream trip you’ve been planning.

Leverage investments with varying timeline horizons to react to market conditions

Well-rounded retirement portfolios include investments with a variety of timelines

The market can be difficult to predict. However, well-rounded retirement portfolios include investments with a variety of timelines so you’re able to draw funds from whichever is most opportune to exit at any given time.

When your portfolio encompasses both low-risk and growth-seeking elements, you’ll have the power to react opportunistically to market conditions without risking the part of your retirement ‘pot’ that’s relatively unaffected by falling asset prices.

With this approach, you’ll also benefit from more flexibility when it comes to tax structuring. And it’s worth bearing in mind that registered pensions do not form part of your estate when it comes to Inheritance Tax – so from a tax perspective, it’s sensible to spend money from other investments or ISAs first.

Consider pension, tax and health implications of your chosen retirement location

Your chosen retirement location will have pension, tax and health implications

As an international professional, you’ll inevitably have a few additional complications to factor into your retirement plans – with the trade-off that you’ll enjoy some fantastic benefits.

Your chosen country of residence is a factor, of course, and your adviser will be able to help you with the relevant tax and health cost considerations. You’re also likely to benefit from pension plans which are internationally mobile.

Making the switch from accumulating to decumulating wealth can be a psychological challenge when you’re approaching retirement. However, with a plan that maps out exactly what you’ll need for living expenses – as well as any discretionary expenditure and gifts – you’ll be able to enjoy the life you’ve worked so hard to achieve. Your adviser can help you calculate a safe withdrawal rate, which uses life expectancy estimations to calculate how much can be withdrawn each year without running your ‘pot’ dry.

Keep your money working for you, even once you’ve retired

Lawsons Wealth help you achieve your retirement goals

As you approach retirement, your priorities naturally shift. But that doesn’t mean that your money should stop working for you. Even when you’ve stopped earning a regular salary, you’re still able to invest in products, although time horizons and liquidity are obviously factors to consider.

At Lawsons Wealth, our expert advisers create a detailed plan designed to achieve your retirement goals. From investments and pension reviews to pension transfers, we’ll help you put together a portfolio that’s optimised for a stress-free retirement, whatever the future holds. And in addition to extensive global wealth management experience, our advisers are experts at leveraging our pioneering cash flow modelling software – giving you the confidence to trust the plan you’ve put in place.

Delivering realistic portfolio projections based on monthly updated economic scenarios for more than 700 asset classes, our best-in-class software links to your financial goals. With fully-integrated cash flow planning, we identify possible budget shortfalls or surpluses – empowering you to make timely, evidence-based decisions. What’s more, unlike other software, ours integrates the effect of investment risks on the realisation of your expenditure goals.

To find out more about how we’ll help you plan effectively for your dream retirement, chat to one of our expert advisers.

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