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Combating inflation the ‘silent thief’

Why retirement planning needs to account for longevity risk

Embarking on your retirement journey is a significant milestone filled with possibilities and new beginnings. However, being aware of potential pitfalls that could undermine your financial security is essential. One of the most prevalent issues is failing to protect against inflation. Known as the ‘silent thief’, inflation can gradually erode your savings and income purchasing power.

For example, the average price of a white loaf of sliced bread (800g) has soared from just 10p in January 1971 to 140p in August
2024[1]. Therefore, ensuring that your investments and income grow at a rate that outpaces inflation is vital. With our professional
advice, we can help mitigate the impact of inflation on your pension and other investments, preserving your buying power.

Preparing for a longer life

Another crucial aspect of retirement planning is accounting for longevity risk. Many underestimate their life expectancy, leading to a
potential shortfall in retirement savings duration. According to the Office for National Statistics, a 60-year-old man today has an
average life expectancy of 85, but there is, however, a chance they might live longer: 92 years (1 in 4 chance), 97 years (1 in 10
chance) and 100 years (3.5% chance)[2].

A 60-year-old woman today has an average life expectancy of 87, but there is, however, a chance she might live longer: 94 years (1 in
4 chance), 98 years (1 in 10 chance) and 100 years (6.2% chance) [2].

Having a realistic financial plan is essential to avoid prematurely depleting your savings. We can use cashflow modelling to help you
foresee when your funds might run out and what adjustments in spending could mean for your financial future.

Structuring your income wisely

Effectively structuring your retirement income is paramount to maintaining financial security. Deciding when and how to draw from
your investment portfolio can significantly impact you. While general rules of thumb exist, the most effective strategy should be
tailored to your personal circumstances and adaptable to your changing needs.

Maintaining a cash reserve for planned one-off expenses and emergencies is advisable. Keeping six months’ worth of essential
spending in an easy-access account is wise, allowing you to avoid withdrawing from investments during market downturns.

Navigating dividend income realities

It’s important not to assume that dividend income is guaranteed, as this could lead to financial instability, as dividends are inherently volatile. Relying solely on dividends for a consistent income stream can be risky. We can assist you in building a diversified investment portfolio that maximises retirement income across a variety of market conditions, helping you navigate the uncertainties that could arise from a dependence on dividend income.

Our professional advice will ensure you can tackle the complexities of retirement planning, minimising risks while enhancing income potential from your savings and investments. With so much at stake, professional financial advice is invaluable. Our support
throughout your retirement journey will provide reassurance and strategic insights, ensuring your plans remain on track.

How will you secure your envisioned future?

Contact us for expert advice tailored to your unique goals and achieve the peace of mind and financial stability you need for
retirement. Let us help you secure your envisioned future, turning your retirement aspirations into reality. Discuss how we can support your retirement journey with personalised, professional advice. We look forward to hearing from you.

Source data:
[1] https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czoh/mm23/previous/v107
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS
SUCH. AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD
HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOU
INVESTED.

Adam Reeves

Author: Adam Reeves

DipPFS Cert CII (MP&ER)
Independent Financial Planner, Wealth Manager, Director

Last updated on

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Adam was quick to assess & understand my situation, and was able to discuss & communicate in a very concise and simple way the various options available to me, taking time for me to understand and clarify where necessary. My understanding & knowledge of taxation & pensions has increased significantly allowing me to feel much happier making financial decisions for the future.

Rob – West Sussex

Adam and his team undertook in-depth research into our existing QROPS schemes and clearly set out both pros and cons of transferring the funds back to the UK. Having decided to go ahead with the transfer, Adam and his team worked extremely hard to facilitate the transfer. The QROPS pension trustees were not always the most professional or responsive organisation – however we were very grateful for the perseverance and commitment that Adam showed us as clients.

Jonathan – East Sussex

Adam offered a range of financial products , the one he suggested was affordable and proved to be a good choice.  Returns on investments have exceeded my expectations, based on Adam’s advice and guidance. Profits have enabled house improvements to take place.

David - Surrey

Adam arranged an appointment very timely, he explained his role and qualifications as an IFA giving me reassurance , we went through my retirement and investment goals. Adam discussed my options explaining in great detail, I felt relaxed during our discussions allowing me to fully understand my choices. I feel very confident in the financial advice allowing me to enjoy my retirement.

I was very happy with Adam’s recommendations and explanations of financial products which would suit my retirement goals, I feel this has helped me review and reduce my financial risk as I reach retirement, leaving me feeling confident that I can enjoy my retirement plans.

Ron – West Sussex

After initial meeting Adam put together a very detailed and thorough written plan. At our second meeting he went through the whole booklet and explained everything in layman’s terms which made it a lot easier to understand.

I am very happy with everything that was suggested and put in place especially with something as big and important as pensions. Adam and his team have taken a huge weight off my shoulders and I would highly recommend their services to anyone needing help with their financial planning and pension.  Adam couldn’t have been more helpful, and even came outside his normal area to meet me on a number of occasions.

Richard - Kent

Unfortunately I had to claim on my critical illness insurance due to my wife being ill and because of the sound advice Adam gave in acquiring this insurance we ended up being financially safe through a tough time.

Steve - Kent

Adam did a review of our financial situation, confirmed that Flexible Drawdown best suited our needs as a family, and then did all the research into the best product for us. He will continue to monitor it for me. He acted extremely promptly because we had a deadline for requiring the lump sum; went out of his way arranging meetings during non-office hours, was professional yet friendly and explained a difficult subject very well.

Clare – East Sussex

Adam did a thorough review of my pension policies, clearly explained how well they had performed, how flexible they were, how the market regulation has changed, and, crucially, what the tax implications would be if I were to leave them untouched. He accurately assessed my attitude to risk and recommended an up-to-date solution that will offer me the greatest flexibility at retirement.

Greg – East Sussex
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Data is compiled by Adviser Portals Ltd every 60 minutes. Information is not realtime. Last updated: 05/12/2024 at 06:00 PM
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