How’s Your Retirement Plan?


Financial security in retirement is a major concern for many of us. That's because retirees must factor in not only the loss of a steady paycheck, but also the expenditures associated with passing on assets and maintaining a high standard of living. Many of us would like to set aside some of our money for more luxurious pursuits. To realise our ideal way of life. Make sure you inquire about your retirement plan.

Today's typical retiree receives roughly €18,000 from their employer's pension plan, €8,000 from the government, and €9,000 annually in rental income from a second home or investment property. On top of that, it is common for the same retiree to have a private pension worth an additional €115,000 on average. Some people might even have multiples, each with a far higher total worth. Half of a private pension is often held in cash to protect against fluctuating stock markets, and an additional €25,000 is often put in equities.

If these retirees are childless, their only concern is how to squander their savings before they die. Most people anticipate spending around €10,000 annually on vacations, which will quickly deplete any savings. Time may not be on their side if they hope to save some money and invest it here and there to pay for future healthcare expenses.

Many will recognise this difficulty and worry that the technique doesn't stand up to simple inspection. Concerns are warranted if the 'here and there' investment method entails several high-risk transactions.

It is wise to spread your assets across several sectors, asset classes, and geographical locations to spread out your risk. There is, however, such a thing as too much diversification. Our retiree, if they are stubborn, will seek an annual return of 8%, which is not very practical and will necessitate a re-evaluation of their current investments, especially if there is a long list of them. This is because diversification reduces the effect of any one investment in a portfolio. In this case, less really is more.

Over the long haul, the stock market has returned somewhat more than 5% annually over inflation. Focusing on market segments with higher growth rates will be necessary to compete. Our retiree will have to weigh the benefits and drawbacks of taking this chance. That will inevitably lead to a decrease in available resources. If our retiree doesn't feel strongly enough about them to invest more money in them, they may want to reconsider whether they were worthwhile to buy to begin with.

Our retiree shouldn't take such a high risk if the goal is to keep up with inflation, since achieving the 8pc return will require a significant amount of risk. Therefore, our retiree should choose investments with low volatility. Using a retirement fund that is a hybrid of cash and actively managed funds from throughout the world's stock markets. With his current strategy, the retiree is risking his money with almost little return and a significant opportunity cost. They'll both affect his earnings. By cutting expenses, he may increase his return to a more reasonable 6.5 percent a year after fees.

While it's natural to be uneasy about the state of the market and consider increasing your cash reserves as a result, the adage that "time in the market will outweigh timing the market" holds true. If our retiree is determined to attain his 8 percent, he needs to get moving and put his plan into action so that he can increase the likelihood of achieving growth more than cash returns.

It is more effective in the long run to invest all of your excess cash at once, rather than gradually, because reaching what is known as "the sweet spot of phasing" might take anywhere from 24 to 36 months. There are certainly dangers involved, but our retiree may mitigate them by spreading out his or her investment over a longer period of time (say, five months) and a smaller amount of money (say, €10,000 per month).

Our retiree should consider this while making a final choice concerning his or her future. which would be more disheartening, the possibility that their wealth could diminish overnight… or that our retiree may be passing up significant opportunities for profit? Our retirees' preferences will always be respected in the end.

Want to talk things through?

It's your chance to become more confident about your retirement plan. We are happy to answer your questions and talk through your retirement plan: