In the past, retirement was an event that happened, you might say, at a time that was as regular as clockwork. There was a set age for stopping work and most people in salaried employment stuck to it. Now, choosing your age of retirement has become altogether trickier and many people, myself included, are caught in the horns of a right old dilemma. You see, if we retire at the previously accepted age of 60-65, we face the likely prospect of a longer retirement than our predecessors and the key issue is: how will we fund it?
Investment experts suggest that the typical investment strategies won’t always work efficiently for a long retirement and while they haven’t as yet devised the perfect retirement plan, here are some ideas that just might have the answer for longer-term retirement.
1. Plan early
There are two sides to this aspect of the strategy. On the one hand, many of us have to wait longer to reach retirement age, which would seem to suggest that we will be enjoying life after work for a shorter period. Of course, what we then need to factor in is the fact that we are living longer and this will have the bigger impact on anyone able to retire by their mid-60s. So, it’s a swings and roundabouts situation. However, it is never too late to adjust your investment strategy to take account of this state of affairs, especially if you’re still in your early 50s, and the earlier you plan for a significant number of years without a regular income stream, the more peace of mind you’ll have.
2. Stay in a workplace pension – or opt out?
Research by the Pensions Policy Institute claims that older workers in the age bracket 50 to State Pension Age will benefit from staying in a workplace pension after automatic enrolment. The study reports that 95% of workers in this group will “receive good value” from their contributions within the scheme. It seems that the over 50s aren’t quite so persuaded of this as 15% of the age group opts out; this is a much higher dropout rate than in other age groups, which only have a 9% rate on average. It is true that staying in a workplace pension is not suitable for everyone, but it is worth calculating the cost now and assessing whether it will benefit you in the long term, or not. The Money Advice Service is an excellent source of impartial and free information.
3. Beware over-hyped alternative investments
Have you heard of crypto-currencies? Bitcoin is a leading example and while it is true that many early-adopters of the digital currency made significant sums from relatively small investments, this boat has now sailed. Unfortunately, there are many copycat crypto-currencies out there that seduce the unwary. The majority of these are effectively a Ponzi scheme in which the earliest investors make money from the newer entrants. If somebody offers you an amazing opportunity to invest in a digital currency, take a good, hard look at it. You know what they say; if it sounds too good to be true, it probably is.
4. Tread carefully
A while back I wrote a blog about why women are better stock market investors than men. One of the key reasons is that we girls are less ‘gung-ho’ when we’re investing; we are more likely to think in the long term and we’re better at saving. We are more risk averse than our male counterparts, and that is a quality both sexes should embrace when looking at an investment strategy for a longer retirement.
5. Keep your emotions out of your finances
Staying emotionally detached from money is essential with longer-term investments where your money will be locked away for years. Being passionately involved with your investment portfolio will see you take a rollercoaster ride as the stocks rise and fall. Here are 12 Tips for Retirement Investing from a seasoned Wall Street watcher and he suggests you should get professional help to ensure your stocks are adequately diversified and not just based on your favourite companies. He also counsels against watching the daily stock reports or too frequently checking your account balance if you want to stay stress-free at investing.
Finally, finding a good investment adviser is one of the best steps you can take. Also, be realistic about your personal circumstances and don’t let an ‘expert’ sell you an investment strategy that you’re unsure about. Funding retirement is a challenge most of us have to face, and we should take it armed with the best advice possible.