Navigating Retirement Planning

Some questions for you when it comes to your plans for retirement:

1️⃣ How long are you planning to live?

2️⃣ How much do you need to live on every month?

3️⃣ How exactly do you plan to take ‘just enough’ to enjoy life … but not run out of money?

Tough questions eh?

Stepping into retirement is a huge life decision that comes with it’s own emotional baggage.

You’ve gained back 40+ hours of your week and no longer have to ‘tolerate’ your boss…

But overnight you’re faced with a decision of how to spend your sudden gift of time.

That alone is hard enough to come to terms with without then having to navigate how to make your precious financial resources last for retirement.

How does one even do that when you don’t know how long your retirement will be?! 😫

Or how financial markets will perform over the next 30/40 years.

Or what inflation will do over the next 30/40 years.

With so many unknowns it begs the question where do you even start?

I don’t have all the answers, but I think the below will help.

It’s on you now

Firstly, gone are the days when we all had one employer for life, one pension plan for life, and simply purchased an annuity for life.

With Pension Freedoms, suddenly there is pressure to make your pensions & investments last.

And when they’re gone… they’re gone.

But good news, it’s not all doom and gloom.

With the new freedoms you have complete autonomy to carve a rich and rewarding retirement.

When you invest in a sensible manner (i.e. rely on historical evidence and not fruitless market predictions) you can continue to make your wealth last long beyond your ‘retirement’.

Think less carriage clocks, popping on your slippers and watching your pensions fade away to nothing.

But with so many unknowns, how can you possibly make an informed decision?

I don’t have a crystal ball and neither do you.

But there are some things you should think about before you start.

➡️ What level of income do you need (or ideally want?)

Ask yourself things such as ‘do I want my standard of living to be the same as it is today?’. In other words if you’re currently enjoying a salary of £30,000 p.a. then is that a reasonable starting point for how much income you may look for per year in retirement?

£30,000 per year for life necessitates a decent pot to start with so this reinforces the importance of good savings habits whilst you still have earnings coming in.

➡️ Consider what other income sources you’ll have

Are you one of the lucky few who have a guaranteed pension in the form of a defined benefit/final salary arrangement?

If so plug these into your financial life map.

Do the same with your state pension.

Do you know when these commence?

If these pensions begin later than you would like then do you have sufficient assets elsewhere to draw upon in the interim?

So many people think they should retire when their workplace pension starts paying them an income, but you can actually retire whenever you wish. The key is having conviction and confidence to do so.

➡️ The ‘nastiest problem in finance’

Chances are unless you enjoy reading about this stuff, you won’t have heard of sequencing risk.

You should however be aware of it.

It’s far more damaging to the risks of you living a comfortable and dignified retirement than stock market risks or inflation risks.

But what is it?

Let me bring it to life with an example.

Consider Mr X who has a pension of £400,000.

He decides to retire on the 1st June and plans to take £20,000 a year from his pension. Happy days.

Sadly for Mr X the stock market crashed 2 days earlier and his pension dropped overnight, going from £400,000 to £360,000. Ouch.

Can you see what happens?

His fixed £20,000 erodes more of a smaller pension pot.

The double edged sword that is sequencing risk is the fact that future withdrawals will be based on a smaller pension pot, and because the pension pot has been harmed at the outset, it struggles to recover.

The downward pressure on the pot suffocates the fund to the point where it can never truly recover to what it once was.

Compare this with Mrs Y.

She also has a pension pot of £400,000 and plans to take £20,000 per year. She fortunately started her drawdown journey on the 15th May when financial markets were healthy.

As such the £20,000 didn’t eat into the value of her pot and the leftover pot didn’t have to work hard to recover.

What lesson can you take here?

When you’re retired – and therefore more likely dependent on your pension pot – it’s incredibly important to plan your timing of withdrawals alongside your wider planning strategy.

Sequencing risk tells us that the first few years of retirement are the most important for preserving your portfolio.

The above example was completely outwith the control of Mr X and through no fault of his own he has potentially compromised his long-term retirement plans. Purely as a result of bad luck and timing.

When you’re building up wealth in your working years, these stock market crashes shouldn’t matter to you as you’ve got plenty of time on your side to ride out the storm.

It’s a very different story in retirement.

So how can you avoid this risk?

Is it just a case of holding a good chunk back in cash to live on in times of economic downturn?


But I’m a firm believer there is a better way.

Holding too much in cash is never a good thing and you lose the fight with the terminator of wealth that is inflation.

Instead, consider a tailored approach of remaining invested in a diversified portfolio but responding appropriately to the inevitable changes in your own life and in the financial world that will come.

I rely on evidence and strict rules surrounding the management of my client’s funds (tolerance based investing based on portfolio drifts) because if you’re selling your investments to top up cash levels to maintain a cash buffer then how can you decide when the ‘right’ time is to sell?

Can you time the markets?

I can’t.

For some it can be tempting to avoid taking any market risk whatsoever in retirement, but remember that as we are all living longer you need to make your wealth last for longer too!

Too often we focus on the risks of being invested in the great companies of the world (the stock market) but the real risk in retirement is surely running out of money.

Investing in well diversified equities and maintaining a good risk exposure throughout retirement can yield healthy results and afford you a far more generous level of retirement than you perhaps were expecting.

A final tip … be wary of pension fund strategies known as ‘lifestyling’ as you can sleepwalk into a far lower growth potential portfolio than you may want (or worse need).


The recipe for success isn’t simple and it isn’t guaranteed.

But nothing in life is.

However, navigating the noise around unknowns in retirement planning can be as simple as

(1) investing sensibly;

(2) controlling your costs; and

(3) regularly reviewing your plans and adapting for the inevitable changes and unknowns that will come.

We don’t know what’s around the corner, but being on the front foot and proactive with your financial planning offers you the best chance of success.


Disclaimer – the above is intended as guidance and should not be relied upon as financial advice. Please seek regulated financial advice.

Benjamin Mitchell

Benjamin Mitchell

I’m a chartered financial planner that can help you plan for tomorrow and also live for today.

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