What are your plans for when you retire?

Many of us are concerned about our financial security in retirement. This is due to the fact that retirees must account for not just the loss of a stable pay check, but also the costs connected with passing on assets and maintaining a high level of living. Many of us would like to save some money for more expensive activities. Realising our ideal way of life. Make certain you ask about your retirement plan.

The average retiree now earns approximately €18,000 from their employer’s pension plan, €8,000 from the government, and €9,000 in rental income from a second house or investment property per year. Furthermore, the same retiree is likely to have a private pension worth an additional €115,000 on average. Some people may have multiples, each with a far larger overall value. Half of a private pension is often retained in cash to protect against volatile stock markets, with an additional €25,000 typically invested in shares.

If these retirees have no children, their primary concern is how to blow their savings before they die. Most people expect to spend around €10,000 per year on vacations, thus depleting any savings. Time may be against them if they plan to save some money and invest it here and there to cover future healthcare costs.

Many people will recognise this challenge and be concerned that the technique will fail a simple inspection. Concerns are justified if the ‘here and there’ investment strategy involves a number of high-risk transactions.

To spread your risk, spread your assets over several sectors, asset classes, and geographical areas. However, there is such a thing as over-diversification. If our retiree is stubborn, they will expect a yearly return of 8%, which is unrealistic and will necessitate a re-evaluation of their current investments, particularly if they have a large list of them. This is due to the fact that diversity decreases the impact of any single investment in a portfolio. In this instance, less is more.

Over the long run, the stock market has returned somewhat more than 5% each year over inflation. To compete, it will be required to concentrate on market segments with higher growth rates. Our retiree will have to consider the advantages and disadvantages of taking this risk. This will obviously result in a reduction in available resources. If our retiree does not believe in them enough to invest more money in them, they may want to reconsider whether they were worthwhile to purchase in the first place.

If the goal is to keep up with inflation, our retiree should not accept such a high risk because reaching the 8 percent return will involve a large level of risk. As a result, our retirees should select investments with low volatility. Investing in a retirement fund that is a mix of cash and actively managed funds from throughout the world’s stock exchanges The retiree’s present method exposes his money to absolutely no return and a substantial opportunity cost. They will both have an impact on his profits. He may boost his return to a more respectable 6.5 percent each year after fees by decreasing expenses.

While it’s normal to be concerned about the market’s health and contemplate expanding your cash reserves as a result, the adage “time in the market will outweigh timing the market” holds true. If our retiree is committed to achieving his 8%, he must get moving and put his plan into action in order to maximise the possibility of generating growth greater than cash returns.

In the long run, it is more advantageous to invest all of your spare funds at once rather than gradually, because attaining what is known as “the sweet spot of phasing” might take anywhere from 24 to 36 months. There are risks, but our retiree can reduce them by spreading his or her investment over a longer length of time (say, five months) and a smaller quantity of money (say, €10,000 each month).

Our retiree should think about this before making a final decision on his or her future. Which would be more disheartening: the potential that their riches could vanish overnight, or that our retiree could be missing out on big profit opportunities? In the end, our retirees’ preferences will always be respected.

Want to talk things through?

It’s your chance to become more confident about your retirement plan. If you contact us, we are more than happy to answer your questions and talk through your retirement plan.